THE ROLE OF INNOVATION CAPABILITY IN MEDIATING THE INFLUENCE OF SOCIAL CAPITAL ON MSME PERFORMANCE IN DENPASAR CITY

Management and Commerce

The post-COVID-19 pandemic has had various impacts on many aspects and areas of people's lives, especially the economic sector. In general, the COVID-19 pandemic has had several significant impacts on the community's economy. This research aims to solve the performance problems of SMEs in the culinary and hospitality sector in Denpasar City by involving several internal company environmental factors to build a competitive strategy. The variables involved in this research consist of social capital, innovation capability, and performance. This research involved 200 SMEs consisting of 167 culinary businesses and 33 hotel businesses in Denpasar City. By using a structural equation modeling (SEM) approach, the results obtained show that social capital has a direct and insignificant effect on the business performance of culinary and hospitality SMEs in Denpasar City. However, social capital indirectly influences SME performance through innovation capabilities. Furthermore, culinary and hospitality SMEs are dominated by young entrepreneurs. This can be valuable capital for SMEs to be more innovative and creative in company improvement strategies, especially in facing the COVID-19 pandemic. This active participation helps SMEs cultivate the latest knowledge and information in the business world.

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