The Influence of Network Capability to Business Performance ofEast Java MSMEs: Knowledge Creation and Business Process Agility as Mediator

Abstract

This research is motivated by the condition of MSMEs in the cafe and restaurant sector in East Java Province, Indonesia, which must face major changes in the environment, namely transformation in the digital era and improving performance which had been caused by the impact of Covid 19. Utilization of network capability in the cafe and restaurant business is needed to improve business performance by involving knowledge creation and business process agility to be able to sustain in this completely digital environment, and this is the aim of this research. Therefore, this research involved a sample of 228 owners or top management of cafes and restaurants in East Java. Data collection was carried out by distributing questionnaires and then analyzed using partial least squares method. The results of this research show that network capability influences business performance. Furthermore, network capability also influences knowledge creation and business process agility. Business performance is influenced by knowledge creation and business process agility. Finally, the findings of this research explain that knowledge creation and business process agility can mediate the relationship between network capability and business performance.