Innovation Capability and Supply Chain Integration in MSMEs Performance

The key to the success of the company in this dynamic era is innovation capability and absorptive capacity. There is a paucity of research that links these two things with supply chain integration, especially for MSMEs. This study aims to analyze the relationship between innovation capability, absorptive capacity and supply chain integration in improving the performance of MSMEs in the creative industry of Yogyakarta Indonesia. The empirical test, which used a sample of 135 managers of the creative industry MSMEs in Yogyakarta supports most of the hypotheses in the study. The study conducted structural equation modeling to test the proposed relationship. The results demonstrate that innovation capability has a significant influence on supply chain integration and the performance of MSMEs. And supply chain integration has significant role on performance of MSMEs. The results of this study are expected to be able to contribute to SME managers both owners and the government in improving the performance of creative industry MSMEs in Yogyakarta.