dissemination of questionnaires with the number of respondents amounting to 97 Handycraft owners in Medan

City. Some of the study findings include; 1) Transformational Leadership has no positive and significant effect

on MSME Performance. 2) Transformational Leadership has no positive and significant effect on

Organizational Learning. 3) Organizational learning has no positive and significant effect on MSME

Performance. 4) Transformational Leadership has a positive and significant influence on Organizational

Innovation. 5) Organizational Innovation has no positive and significant effect on MSME Performance. 6)

Transformational Leadership has a positive and significant effect on organizational competitiveness. 7)

Organizational Competitiveness has a positive and significant effect on the performance of MSMEs. 8)

Transformational Leadership has a positive and significant effect on the organizational environment. 9)

Organizational environment has a positive and significant effect on MSME Performance. 10) Transformational

Key-Words: - Transformasional Leaderhip, Learning, Innovation, Competitiveness, Environment, MSMEs

one of the main pillars of economic development in

developing countries. In addition, MSMEs are

important contributors to job creation and global

economic development [1]. MSMEs have played a

role in inclusive growth that has occurred since the

global financial crisis during 2008-2009 [2].

great deal of business failures.

batik, leather shoes, decorative lights, embroidery,

wood carvings, and other souvenirs. Therefore, the

handicraft industry is one of the products that have

great opportunities and its business activities have

flexibility with the socio-economic conditions of the

community [4]. By that means, the handicraft sector

in Medan City becomes the sector that absorbs the

market access, and the use of technology for

MSMEs [6]. By that means, leadership is needed in

MSME owners to be able to create collective

awareness of workers in improving the performance

of MSMEs. This condition examines the problems

faced by Handicraft MSMEs in Medan City

including human resources, product innovation, raw

materials, business management, marketing, and the

use of technology.

Batik craft MSMEs, even found that MSME owners

are only brokers and did not have innovations in

improving the performance of MSMEs [8].

handicraft MSMEs made from waste do not master

marketing strategies, have poor financial

management, and do not take advantage of the use

of technology [9]. In addition, Meliala found that

the main problems of shoe craft MSMEs are due to

human resources, capital, facilities, and

realized that the limited capital in rattan handicraft

MSMEs affected the difficulty of obtaining raw

materials [12][13]. In general, Muchtar revealed that

MSMEs do not own the handicraft business network

and business owners are not able to innovate

through the transformation of local values to

produce the latest products [14]. Based on previous

dominantly adopting transactional leadership [21].

In addition, Syamsurizaldi's dissertation showed that

there is a significant relationship between

transactional leadership and the performance of the

small furniture industry in West Sumatra [22].

MSMEs. Therefore, further research is needed to

adopt the most effective leadership in improving the

performance of MSMEs. However, this research

focuses on transformational leadership, which seeks

to provide values for members to adhere to in

supporting organizational performance [26].

Through value transformation, hopefully, the

relationship between leaders and members can

influence the performance of handicraft MSMEs in

MSMEs. Therefore, in meeting the challenge of

innovation, some organizations introduce the

concept of organizational learning [28]. In addition,

Baker & Sinkul proved that an organization needs to

understand organizational learning. With it, you can

successfully launch a new product or service into

the market to meet consumer needs and achieve

improved performance, as well as a sustainable

competitive advantage [29]. Many researchers argue

that there is a positive relationship between

out innovation-oriented strategies. Innovation is

very important for companies as most of the

company's profits come from the results of

innovation. Innovation is not only capable of

producing economic efficiency, but also able to

improve service or production capabilities, both in

quality and quantity. MSMEs in facing an

styles applied to MSME performance. In fact,

Transformational leadership has a positive and

significant relationship with MSME performance.

but not significant relationship with MSME

performance. The hypothesis proposed in this study

is[18][20][19][38][39].

H7: Organizational competitiveness has a positive

and significant effect on the performance of

MSMEs

H9: Organizational environment positively and

transformational leadership variables have an

indirect effect if not mediated by organizational

Yulianeu's research that there are organizational

learning variables to mediate between

transformational leadership and MSME

performance [63][64][41]. Thus, there is the

influence of Transformational Leadership on

MSME Performance in mediation by Organizational

Learning. So the hypothesis proposed in this study

inner model testing is used to test research

hypotheses.

The study used primary data obtained from

questionnaires shared with respondents.

rate of 100%. In addition, the characteristics of

respondents based on gender include; 75 women

and 22 men. Educational characteristics of

respondents 67 High Schools, 18 Diplomas, 12

Bachelors. Most MSME owners on average have a

workforce between 2-5 people, which is as many as

88 respondents. Furthermore, the average for the

length of effort between 2 -6 years is as many as 57

respondents.

overview of the data such as the highest value,

lowest value, average value, and standard deviation

of the variance of the data studied.

of the research data obtained an average value of

3.619, 3,598, 3,711 SME Performance, while the

standard deviation values of SME Performance were

0.999, 0.970, and 0.963. This condition showed that

the performance of SMEs is quite good. Other than

that, the mean values of Transformational

standard deviation values of Organizational

Learning were 0.865, 0.799, and 0.739. This showed

that Organizational Learning is of good value.

Organizational Innovation are 4,134, 3.948, and

3,907, while the standard deviation values of

Organizational Innovation are 0.795, 0.866, and

0.942. This showed that Organizational Innovation

is good. In addition, the average value of

Organizational Competitiveness is 4,134, 3.948, and

in measuring the research variables, indicated by the

calculated R value of all questionnaire items that

have exceeded the R table value (0.361).

Meanwhile, the reliability test in this research was

measured using the Cronbachs Alpha reliability test.

In this test, the instrument is declared reliable if the

Cronbachs alpha value is> 0.7.

4.3.1. Convergent Validity Test

0.5 which indicated that all indicators in each

construct have met the required convergent validity

criteria.

all indicators have the highest indicators in their

constructs not in other constructs so that it can be

stated that all indicators have met the requirements

of discriminant validity.

validity testing with the 3 test methods, it can be

concluded that the outer PLS model has met the

required discriminant validity criteria.

4.4. Inner Model Test

of R square model showed the predictive power of

the model seen from the power of exogenous

variables in predicting endogenous variables. The

value of R square was categorized into 3 categories,

namely good, moderate and weak. According to

Chin, the R square value of 0.67 indicated that the

PLS model is strong, 0.33 indicated the PLS model

is in the moderate category and 0.19 indicated that