Analysis of Digital Adoption Capability and Perceived Product
Advantage on Network Externalities and Sustainable Business Growth
on MLM in Indonesia
THAMRIN SELAMET
Management Binus Business School,
Binus University Jakarta Indonesia,
Jl. K. H. Syahdan No. 9, Kemanggisan, Palmerah,Jakarta, 11480,
INDONESIA
TIRTA NUGRAHA MURSITAMA
Department of International Relations,
Binus University Jakarta Indonesia,
Jl. K. H. Syahdan No. 9, Kemanggisan, Palmerah,Jakarta, 11480,
INDONESIA
ASNAN FURINTO
Department of Management,
Binus University Jakarta Indonesia,
Jl. K. H. Syahdan No. 9, Kemanggisan, Palmerah,Jakarta, 11480,
INDONESIA
PANTRI HERIYATI
Department of Management,
Binus University Jakarta Indonesia,
Jl. K. H. Syahdan No. 9, Kemanggisan, Palmerah,Jakarta, 11480,
INDONESIA
Abstract: - The problems of the MLM industry in Indonesia include: MLM companies do not have
strategic flexibility and sensitivity to dynamic markets. This study will determine the effect of Training
and Development, Compensation and Reward System, Digital Adoption Capability and perceived Product
Advantage on Network Externalities and Sustainable Business Growth. The method used in this study is a
quantitative research method. The process of collecting data using a questionnaire is carried out once in a
certain time span without repetition, namely one shoot cross-sectional, so that a total sample of 319 MLM
companies is obtained. The results show that Training and Development has a positive effect on Sustainable
Business Growth, Training and Development has a positive impact on Network Externalities, Compensation
and Reward System has a positive effect on Sustainable Business Growth, Compensation and Reward System
have a positive impact on Network Externalities, Digital Adoption Capability does not affect Sustainable
Business Growth, Digital Adoption Capability has a positive effect on Network Externalities, perceived
Product Advantages have no effect on Sustainable Business Growth, perceived Product Advantages have no
effect on Network Externalities, and Network Externalities have a positive effect on the Company's sustainable
business growth. The novelty of this research is that it is found that Research on the MLM Industry has
continued to grow in the last 24 years but not significantly, the MLM business globally and nationally
continues to grow. The number of articles is still very limited, so references in the MLM industry are limited.
The contribution of this research is that MLM companies and their management teams also get additional
references to develop a solid framework to increase the growth of sustainable MLM business in Indonesia.
Key-Words: - Training and Development, Compensation and Reward System, Digital Adoption Capability,
Perceived Product Advantage, Network Externalities.
Received: June 6, 2022. Revised: December 5, 2022. Accepted: January 7, 2023. Published: February 2, 2023.
WSEAS TRANSACTIONS on BUSINESS and ECONOMICS
DOI: 10.37394/23207.2023.20.36
Thamrin Selamet, Tirta Nugraha Mursitama,
Asnan Furinto, Pantri Heriyati
E-ISSN: 2224-2899
388
Volume 20, 2023
1 Introduction
Multi-Level Marketing (MLM) or often called
Network Marketing in Indonesian translated as
Network Marketing or Tiered Marketing is a
method or method of marketing products or services
directly from Producers through Direct Sellers or
Agents or Independent Distributors to Consumers
without going through store facilities, kiosk or
permanent place of business, [1], [2]. According to
Dhiraj Jain & Sachdev, [3] Network Marketing or
MLM is a marketing strategy used by sellers to sell
their products or services through distributor
networks or directly to consumers
The problems of the MLM industry in Indonesia
include: MLM companies do not have strategic
flexibility and sensitivity to dynamic markets, have
not reached a wider market reach, and the pattern of
developing business partners has not been effective..
Based on existing data and phenomena, it shows
that MLM business growth in Indonesia is quite
high, but global sales volume is not significant and
not maximized, there are also 11 MLM companies
that close every year so researchers consider it
necessary to conduct a study on how to increase
MLM business growth and sustainability. MLM
business in Indonesia, as well as what factors
influence it, considering that the MLM industry has
the potential to support Indonesia's economic
growth.
In various MLM studies it is implied that the
more people who join an MLM company and use
their products, the greater the MLM company's
business volume and is an indicator of the success
of an MLM business. [4], [5]. Network externality
refers to the phenomenon that when the number of
users using the same product or service increases,
the benefits that each user derives from the product
or service also increase, [6]. Various studies say that
network externalities affect company performance
in the IT and Communication industry, [7], [8],
because according to the nature of the MLM
business model, the researcher will test the potential
influence of network externalities on the business
growth of MLM companies which has rarely been
empirically tested in the previous MLM industry.
Previous research has revealed that recruitment,
training and development of MLM distributors, as
well as support to MLM distributors, compensation
and reward systems are very important in MLM
business development, [1], [9] which are dimensions
of HR Practice in various studies, [10], [11]. This
study also confirms that the reward and training
systems affect sustainable competitive advantage,
[1]. Research says that the implementation of the
role of strategic business partners by human
resources (HR) has great potential to contribute to
the strategic agility that companies need to compete
globally successfully. Based on the background of
the above problems, this research will discuss the
effect of Training and Development, Compensation
and Reward System, Digital Adoption Capability
and perceived Product Advantage on Network
Externalities and Sustainable Business Growth in
MLM in Indonesia.
This research is built based on phenomena that
occur in the MLM industry, builds a best practice
framework to provide alternative solutions to the
MLM industry, focuses on network externalities to
improve the business performance of MLM
companies in Indonesia, which has the potential to
be a novelty in this research. Network externalities
are new because research on this variable is still rare
and focuses only on consumers and the use of
communication products. In this study, network
externalities will be examined from a different point
of view, namely the role of consumers and sellers in
distributing existing products and services with
broader product and service categories.
2 Literature Review and Hypotheses
2.1 Relationship between Training and
Development and Sustainable Business
Growth
Previous research conducted on smart manufactures
(smart manufacture) in Malaysia using secondary
data resulted that the three dimensions of HR
practice, namely training and development (training
and development), performance appraisal
(performance appraisal) and the reward system
(rewards system) provide good motivation. strong
so that it can provide good performance, [12]. The
study was conducted by distributing six hundred
questionnaires randomly to selected university
employees in Erbil City, Iraq to examine the effect
of strategic human resource management (HRM)
practices on achieving sustainable competitive
advantage, and evaluating the mediating role of
human capital development. linear and positive of
strategic HRM on sustainable competitive
advantage, [13]. The formulation of the hypothesis
is as follows:
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Thamrin Selamet, Tirta Nugraha Mursitama,
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H 1: Training and Development has a positive effect on
the Company's sustainable business growth.
2.2 Training and Development Relations
and Network Externalities
To measure HR systems, Kehoe et al., [14], suggest
choosing HR practices which are organizational
actions, processes, or work structures that directly
affect employees and relate to system goals. To
choose which HR practices to include in the system,
conduct a process of measuring at least six of the
most widely adopted practices such as training and
development, participation/autonomy, incentive
compensation, performance evaluation, selection,
and job design. Following the MLM business
model, [9], this study uses partner development
orientation variables with dimensions of incentive
and reward systems, training and development, [1],
and company support adopted from HR practices,
[12], and examines its effect on the sustainable
business growth of MLM companies. The
formulation of the hypothesis is as follows:
H 2: Training and Development has a positive effect
on Network Externalities.
2.3 Compensation and Reward System and
Sustainable Business Growth
In previous research on the MLM industry, it was
also found that the distributor reward system and
distributor training system positively affect the
sustainable competitive advantage of MLM
companies in Malaysia, [1]. The training program
alone is not enough to achieve a competitive
advantage for the company. To produce human
resources that can be a source of competitive
advantage, it is necessary to combine them with
other human resource practices, [15]. According to
Boxall & Macky, [16] a competitive compensation
structure not only benefits employees, but also
improves company performance. It distracts
employees from generating more revenue for their
organization and empowers them to tackle their
departmental agendas. A holistic approach is built to
achieve growth by setting business targets for the
company. The formulation of the hypothesis is as
follows:
H 3: Compensation and Reward System has a
positive effect on Sustainable Business Growth.
2.4 Compensation and Reward System and
Network Externalities
Network externalities are a special type of external
effect. External effects exist whenever the
production or consumption of goods or services
results in costs or benefits experienced by third
parties without these parties receiving compensation
for the costs incurred by each paying for the benefits
received. The lack of price inherent in external
effects prevents market processes leading to
efficient levels of production or consumption of
these goods. Various studies further highlight that
research on the relationship between reward and
retention should not fail to consider how
demographic factors among recipient employees
might alter that relationship, [17]. Specifically,
human resources are knowledge, skills, network
personality, and motivation, enabling certain
abilities to develop, [16]. The formulation of the
hypothesis is as follows:
H 4: Compensation and Reward System has a
positive effect on Network Externalities
2.5 The Relationship of Digital Adoption
Capability and Sustainable Business Growth
Previous research used data on digital technology
use spanning 25 industries in 24 European countries
and Turkey during the 2010-16 period to explore
covariates of industry-level digital adoption by
enterprises across two broad technology sets – cloud
computing and back and front office integration.
The diffusion of high-speed broadband internet is
positively correlated with adoption. Low managerial
quality, lack of ICT skills and policies that limit
market access, competition in services, hiring and
firing, and availability of venture capital are
associated with lower adoption of digital
technologies, [18]. While the political field has
explored the practice of digital adoption in the
Labor Party to examine elite perceptions and
applications of interactive digital tools, this study
has shown evidence of interest among elites in
interactivity, [19]. The formulation of the hypothesis
is as follows:
H 5: Digital Adoption Capability has a positive
effect on Sustainable Business Growth
2.6 Relationship of Digital Adoption
Capabilities and Network Externalities
A number of studies have confirmed evidence of the
effect of direct network externalities in the digital
environment, digital transformation and the
influence of network externalities contribute to an
increase in the number of subscribers, a reduction in
the number of networks (distortion of market
competition), and a decrease in telecommunications
prices, [20]. Previous research on network
externalities is generally in the telecommunications
sector, [21], social networking sites, [22], relating to
WSEAS TRANSACTIONS on BUSINESS and ECONOMICS
DOI: 10.37394/23207.2023.20.36
Thamrin Selamet, Tirta Nugraha Mursitama,
Asnan Furinto, Pantri Heriyati
E-ISSN: 2224-2899
390
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digital technology. User (or customer) loyalty is an
important source of competitive advantage for
companies that market their products or services
through conventional and/or online channels, and
various emerging online service providers,
particularly in the area of direct selling MLM. The
formulation of the hypothesis is as follows:
H 6: Digital Adoption Capability has a positive
effect on Network Externalities
2.7 The Relationship of Perceived Product
Excellence and Sustainable Business Growth
Previous MLM research has shown that product
innovation does not increase sustainable competitive
advantage due to the absence of product exclusivity
and special uniqueness because products are easy to
obtain from OEM and imported factories. Malaysian
MLM Distributors consider that product innovation
causes products to be expensive, complicated,
difficult to sell, shared, and taught to their
downlines, [1]. Previous research on MLM found
that perceived product value tends to affect
consumer satisfaction, [23]. Products are fairly
important for MLM companies to develop their
business and increase their competitive advantage,
[24]. Based on various previous studies, the
researcher developed and tested the importance of
perceived product advantage in the MLM industry
to increase sustainable business growth. The
formulation of the hypothesis is as follows:
H 7: The perceived superiority of the product has a
positive effect on the company's sustainable
business growth.
2.8 Relationship of Perceived Product
Advantage and Network Externalities
The concept of product advantage influences
consumer purchasing decisions, forming a strong
rationale for product adoption by the market, [25].
Product is an important element in direct selling or
MLM [26]. Perceived Product Advantage has also
been shown to be an important factor in explaining
the adoption and success of product offerings. And
it is suspected that the perception of product
superiority greatly affects the effects of network
externalities which ultimately increase the growth of
the MLM business. Product excellence is
consistently identified as the most important product
characteristic in explaining the adoption and success
of a new product. Unique products and products that
solve customer problems are also considered
important in building product advantages. The
concept of product excellence influences consumer
purchasing decisions, forming a strong reason for
product adoption by the market, [25]. Perceived
quality can be defined as a consumer's assessment of
the superiority or superiority of the product as a
whole. This perception-based approach views
quality as a form of overall evaluation of a product,
indicating that quality is a relatively global value,
[27]. The formulation of the hypothesis is as
follows:
H 8: The perceived superiority of the product has a
positive effect on Network Externalities.
2.9 Network Externalities affect the
Company's sustainable Business Growth
Previous research has tested network externalities in
the IT industry, [28], [22], customer loyalty, [29],
digital platforms, [30], and the desire to provide
recommendations for product use, do not directly
test the effect on performance where causality some
tests intrinsically and extrinsically reflect
performance, so this study conducted tests to
confirm the relationship of network externalities
with the business growth of MLM companies.
Previous research by Kim et al., [31], empirically
compares network externalities' effects on customer
recommendations between luxury and necessity
products. To verify the hypothesis, data were
collected from 539 consumers. Empirical results
show that for luxury and necessity products, direct
network externalities positively impact customer
recommendations, while network externalities
indirectly negatively impact customer
recommendations. This study extends the theory of
network externalities and proves that network
externalities are an important way for companies to
gain a competitive advantage that improves business
performance. This shows that network externalities
have 2 dimensions, namely direct and indirect
externalities. The formulation of the hypothesis is as
follows:
H 9: Network Externalities have a positive effect on
the Company's sustainable business growth.
3 Method
The method used in this study is a quantitative
research method. The survey was conducted to find
answers to research questions through data
collection and then further analysis was carried out,
[32], the unit of analysis is an official MLM
company and has a license to operate in Indonesia,
both foreign companies and domestic companies
represented by top management Companies such as
CEO, General Manager, or Senior Manager who are
authorized in making strategic decisions of the
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Thamrin Selamet, Tirta Nugraha Mursitama,
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Company. Collecting data using questionnaires is
carried out once in a certain period without
repetition, namely one shoot cross-sectional.
Based on the reference to the number of samples
using the Krejcie & Morgan, [33], methods, the
researcher will conduct a survey of all MLM
companies in Indonesia, totaling 319 MLM
companies officially registered with the Ministry of
Trade of the Republic of Indonesia. The purpose of
conducting a survey to all so that this research
remains valid if there are respondents who do not
meet the requirements when filling out the research
questionnaire. The questionnaire for each
operationalization of the research variable was
designed with five alternative answer choices using
a Likert scale including: 5 for strongly agree (SS), 4
for agree (S), 3 for Neutral (N), 2 for disagree (TS),
and a score of 1 for strongly disagree (STS).
To test the hypothesis, Structural Equation
Modeling (SEM) is used which is an analysis of the
research model to determine the relationship
between variables in research by providing
quantitative tests of the theoretical model
hypothesized by a researcher, [34].
4 Analysis and Discussion
Table 1. Demographics of Respondents
Characteristics
Category
%
Respondent Profile
Gender
Man
83,5 %
Woman
16,5 %
Age
25 - 30 years
5,5 %
31 - 35 years
11,0 %
36 - 40 years
28,6 %
41 - 45 years old
22,5 %
> 46 years old
32,4 %
Position
CEO
50,0 %
Senior Manager
8,8 %
General Manager
16,5 %
Marketing Manager
9,3 %
CMO
8,2 %
Country Manager
4,4 %
COO
2,7 %
Firm address
Jakarta head office
57,1 %
Surabaya head office
15,4 %
Salatiga head office
0,5 %
Karanganyar
0,5 %
Malang
0,5 %
BANDUNG
2,7 %
BATAM
0,5 %
Tangerang-Selatan
4,4 %
Bekasi
1,1 %
Depok
2,7 %
Medan head office
2,7 %
Yogyakarta
3,8 %
BOGOR
2,2 %
China
0,5 %
Semarang
2,7 %
Gorontalo
0,5 %
South Borneo
0,5 %
Solo
0,5 %
Makassar, sulawesi
selatan
0,5 %
Company
Operating Time
< 5 Years
61,5 %
5 - 10 Years
19,2 %
11 - 15 Years
6,6 %
16 - 20 Years
3,3 %
> 20 Years
9,3 %
Company
Origin
Amerika
8,8 %
Indonesia
70,3 %
Malaysia
6,0 %
Korea
3,8 %
Taiwan
1,1 %
Jepang
1,1 %
China
5,5 %
Singapore
1,6 %
Hong Kong
0,5 %
New Zealand
0,5 %
Irlandia
0,5 %
Partial Least Square (PLS) method was used in this
study to analyze the response. The same choice was
made in other similar studies, as can be seen from
Table-1. Apart from taking cues from previous
research work, Partial Least Square (PLS) is
effective in analyzing the relationship between
several variables and is believed to provide more
accurate results than simple regression. This method
is very helpful in testing the relationship between a
set of dependent variables with two or more
independent variables. By using PLS, Structural
Equation Modeling (SEM) can be used with
relatively small sample sizes and also eliminates the
need for multivariate normality assumptions.
Table 2. Construct Reliability and Validity
Variable & Indicators
OL
CA
CR
AVE
Training and Development
T
N
D
1
:
Because they have received
training from the Company,
the Direct Seller is ready to
do their job.
0,894
0,881
0,926
0,807
T
N
D
2
:
In our company, Direct
Sellers or members are given
skills training to improve
their capabilities and
abilities.
0,915
T
N
D
3
:
By participating in training,
new members can improve
the skills needed for sales and
recruitment.
0,886
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Compensation and Reward System
C
R
S
1
:
Direct Sellers or members of
our Company are satisfied
with the calculation system
for the distribution of
commissions and bonuses.
0,856
0,801
0,884
0,718
C
R
S
2
:
Direct Sellers or members of
our Company are satisfied
with the scheduling of
commission and bonus
payments.
0,916
C
R
S
3
Our company uses a reward
system (cash, travel, and
other incentives) to increase
the motivation of Direct
Sellers or members.
0,763
Digital Adoption Capability
D
A
C
1
:
New needs that can be met
with new digital business
model innovations
0,861
0,857
0,901
0,697
D
A
C
2
:
There are related parties who
carry out digital innovation
activities (Companies,
0,685
D
A
C
3
The added value provided
with the new digital business
model
0,850
D
A
C
4
Generated revenue model
with new digital business
model towards target
0,923
Perceived Product Advantage
P
P
A
1
:
Increased Profit relative to
competitors
0,736
0,814
0,878
0,643
P
P
A
2
:
Annual ROE increase and
from the previous year
relative to competitors
0,776
P
P
A
3
:
Annual ROA increase and
from the previous year
relative to competitors
0,842
P
P
A
4
:
Increased Sales relative to
competitors
0,848
Network Externalities
N
E
T
1
:
The products of our company
have the potential to be used
by many people.
0,882
0,862
0,905
0,705
N
E
T
2
:
Our company's products have
a large user base
0,817
N
E
T
3
:
Our company considers many
relatives or friends of Direct
Sellers who use our
company's Products
0,822
N
E
T
4
:
Our company has a good
reputation.
0,836
Sustainable Business Growth
S
B
G
1
:
During the 2017-2019 period,
our company had an
increasing market share
growth.
0,946
0,957
0,967
0,855
S
B
:
During the 2017-2019 period,
our company had an
0,953
G
2
increasing sales growth rate
S
B
G
3
:
During the 2017-2019
Period, our Company had an
increased profit margin on
sales
0,935
S
B
G
4
:
During the 2017-2019 period,
the Company always
launches new products every
year.
0,852
S
B
G
5
During the 2017-2019 period,
there was an increase in the
number of new partners in
our company
0,933
A construct is declared reliable if it has a composite
reliability (CR) value above 0.70 and Cronbach's
alpha (CA) above 0.60. From the SmartPLS output
above, all constructs have CR values above 0.70 and
CA above 0.60. So it can be concluded that the
construct has good reliability. Based on table 4.8
above, it shows that the AVE (Average Variance
Extracted) value for all constructs has a value >
0.50. Therefore, there is no convergent validity
problem in the tested model.
To test the discriminant validity, the Heterotrait-
Monotrait Ratio (HT/MT) was deployed since this
method is known has more precise value. Refer to
Hair et al., [35], the recommended threshold value is
0.85 to establish each construct indicator is
conceptually different. Table 3 (HT/MT Ratio)
shows that all HT/MT values are well below the
0.85 thresholds for all variables. Thus, its concluded
that all indicators used in this research model have
adequate discrimination to measure their respective
constructs.
Table 3. Discriminant Validity: HT/MT Ratio
CRS
DAC
NET
PPA
SBG
TND
CRS
DAC
0,406
NET
0,614
0,369
PPA
0,514
0,245
0,357
SBG
0,134
0,174
0,336
0,090
TND
0,652
0,260
0,517
0,479
0,058
It can be concluded that all indicators in this
research model have been well discriminated against
and can measure their respective constructs. Each
indicator can accurately and specifically measure its
construct. There are four parameters to test the
reliability and validity of the outer model above,
namely the reliability indicator (outer loading),
construct reliability (Cronbach's alpha and
composite reliability), construct validity (average
variance extract), and discriminant validity
(Heterotrait-Monotrait ratio).
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Thamrin Selamet, Tirta Nugraha Mursitama,
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Since goodness of fit is not used in PLS-SEM as
suggested by Hair et al., (2019) this study performed
R2 to measure predictive accuracy and the value of
the Q2 cross redundancy to measure predictive
relevance of the test model. As a rule of thumb, R2
values of 0.75, 0.50, and 0.25 can be considered
substantial, moderate, and weak (Henseler et al.
2009; Hair et al. 2011). Network Externalities have
R2 = 0.352 and Q2 = 0.411, and Sustainable
Business Growth (R2 = 0.545; Q2 = 0.405). Both,
Network Externalities and Sustainable Business
Growth have moderate prediction accuracy (Hair et
al., 2019).
Hypothesis testing with the bootstrap procedure
was carried out to determine the effect of the
variables and determine whether the hypothesis
proposed by this study was supported. The bootstrap
approach was used to determine the significance of
the data. The cut-off value of the T-statistic > 1.645
(one-sided) with an alpha of 0.05 was used as a
criterion to determine whether the hypothesis was
supported or not. The results are shown in Table 4.
In addition, mediation analysis was also carried out
to determine the significance of mediation.
Table 4. Significant and Coefficient
Hypothesis
Standardized
Coefficient
T-statistics
P-values
Result
DIRECT EFFECT
H1
:
Compensation
and Reward
System ->
Network
Externalities
0,071
4,27
2
0,000
Hypothesis
Supported
H2
:
Compensation
and Reward
System ->
Sustainable
Business
Growth
0, 13
3,10
7
0,045
Hypothesis
Supported
H3
:
Digital Adoption
Capability ->
Network
Externalities
0,059
3,12
7
0,002
Hypothesis
Supported
H4
:
Digital Adoption
Capability ->
Sustainable
Business
Growth
0,081
0,83
3
0,405
Hypothesis
Supported
H5
:
Network
Externalities ->
Sustainable
Business
Growth
0,074
4,84
4
0,000
Hypothesis
Supported
H6
:
Perceived
Product
Advantage ->
Network
Externalities
0,071
0,74
7
0,455
Hypothesis
Not
Supported
H7
:
Perceived
Product
Advantage ->
Sustainable
Business
0,104
0,01
3
0,990
Hypothesis
Not
Supported
Growth
H8
:
Training and
Development ->
Network
Externalities
0,071
3,28
7
0,001
Hypothesis
Supported
H9
:
Training and
Development ->
Sustainable
Business
Growth
0,091
3,27
5
0,003
Hypothesis
Supported
Fig. 1: Conceptual Framework
Information:
TN : Training and Development
PP : Perceived Product Advantage
CRS: Compensation and Reward System
NE : Network Externalities
DA : Compensation and Reward System
SB : Sustainable Business Growth
5 Discussion
5.1 Training and Development has a Positive
and Significant Effect on Sustainable
Business Growth
It was found that the T-statistical value (3.275) >
1.96 and the original sample value was 0.116
(positive sign). From these results, the hypothesis
which states that Training and Development has a
positive effect on Sustainable Business Growth is
accepted. Ambidextrous Leadership has a positive
and significant impact on Digital Business Model
Innovation. Previous research in Jordan aimed to
identify the role of empowerment practices and
Human Resource Management (HR) on
organizational performance among 13 Jordanian
commercial banks and the results showed that
empowerment and HR practices had a positive and
significant impact on organizational performance,
[36]. Previous research on the impact of human
resource management practices on organizational
performance in 100 managers of manufacturing
companies in Kosovo from the public and private
sectors responded to the survey. The results of this
empirical study indicate that HRM practices have a
positive and significant effect on organizational
performance, [37]. We study the effect of an
important dimension of human resource
management (HRM), that is, employee training, on
4,272, P.0.000
3,287, P.0.001
3,275, P.0.003
TN
D
CR
S
DA
C
PP
NE
T
SB
G
3,107, P.
0,045
3,127, P.
0,002
0,833, P.
0,405
0,747, P.
0,455
0,013, P.
4,844, P.
0,000
WSEAS TRANSACTIONS on BUSINESS and ECONOMICS
DOI: 10.37394/23207.2023.20.36
Thamrin Selamet, Tirta Nugraha Mursitama,
Asnan Furinto, Pantri Heriyati
E-ISSN: 2224-2899
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Volume 20, 2023
firms’ performance in sustainable development,
[41].
5.2 Training and Development Relations and
Network Externalities
It was found that the T-statistical value (3.287) >
1.96 and the original sample value was 0.233
(positive sign). From these results, the hypothesis
which states that Training and Development has a
positive effect on Network Externalities is accepted.
This business is flexible enough to run and does not
require much capital in the form of material, it is
enough with the will, the consistency that is formed,
tenacious, never give up, and the MLM business
will continue to grow. Because this business is
flexible, it's not wrong if some city dwellers and
students become members of this business. Still,
social capital is also the main key to developing and
surviving this business. In a business, social
networking is the most important element,
according to Lawang, [38]. Following the MLM
business model, [9], this study uses partner
development orientation variables with dimensions
of incentive and reward systems, training and
development, [1], and company support adopted
from HR practices , [12] and examines its effect on
the sustainable business growth of MLM
companies.
5.3 Compensation and Reward System and
Sustainable Business Growth
It was found that the T-statistical value (3.107) >
1.96 and the original sample value was 0.04
(positive sign). From these results, the hypothesis
which states that the Compensation and Reward
System has a positive effect on Sustainable Business
Growth is accepted. It distracts employees from
generating more revenue for their organization and
empowers them to tackle their departmental
agendas. A holistic approach is built to achieve
growth by setting business targets for the company,
[27]. A total reward strategy is a system
implemented by a business that provides monetary,
rewarding, and developmental rewards to employees
who achieve certain business goals. This strategy
combines compensation and benefits with
opportunities for personal growth in a motivated
work environment, [39]. Designing and
implementing a total reward strategy requires a
large-scale approach that drives organizational
change. Executive support and top management are
critical to the success of a total rewards strategy,
[44]. The reward system has become one of the
important factors that will greatly affect how the
business grows, [43]. Every organization uses
various rewards to attract and retain people and
motivate them to achieve personal and
organizational goals. The size of the reward given
depends on many things, mainly determined by the
level of achievement achieved, [42].
5.4 Compensation and Reward System and
Network Externalities
It was found that the T-statistical value (4.272) >
1.96 and the original sample value was 0.305
(positive sign). From these results, the hypothesis
which states that the Compensation and Reward
System has a positive effect on Network
Externalities is accepted. The lack of price inherent
in external effects prevents market processes leading
to efficient levels of production or consumption of
these goods. Various studies further highlight that
research on the relationship between reward and
retention should not fail to consider how
demographic factors among recipient employees
might alter that relationship, [17], [40].
5.5 The Relationship of Digital Adoption
Capability and Sustainable Business Growth
It was found that the T-statistical value (0.833) <
1.96 and the original sample value was 0.067
(positive sign). From these results, the hypothesis
which states that Digital Adoption Capability has a
positive effect on Sustainable Business Growth is
rejected. While the political field has explored the
practice of digital adoption in the Labor Party to
examine elite perceptions and applications of
interactive digital tools, this study has shown
evidence of interest among elites in interactivity,
[19]. Qualitative research that provides some advice
to policymakers and technology suppliers on how to
encourage digitalization adoption among SMEs, and
also argues that digital adoption by SMEs stems
from critical orientations, namely sales, marketing,
process improvement, and product development so
as to understand the need for digital adoption, [28].
5.6 Relationship of Digital Adoption
Capabilities and Network Externalities
It was found that the T-statistical value (3.127) >
1.96 and the original sample value was 0.185
(positive sign). From these results, the hypothesis
which states that Digital Adoption Capability has a
positive effect on Network Externalities is accepted.
How a digital platform affects network externalities,
[30], meaningful managerial implications for online
B2B service providers to build a loyal user base
through increasing user perceptions of network
WSEAS TRANSACTIONS on BUSINESS and ECONOMICS
DOI: 10.37394/23207.2023.20.36
Thamrin Selamet, Tirta Nugraha Mursitama,
Asnan Furinto, Pantri Heriyati
E-ISSN: 2224-2899
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externalities, switching costs, and value. User (or
customer) loyalty is an important source of
competitive advantage for companies that market
their products or services through conventional
and/or online channels, and various emerging online
service providers, [26], particularly in the area of
direct selling MLM.
5.7 The Relationship of Perceived Product
Excellence and Sustainable Business Growth
It was found that the T-statistical value (0.013) <
1.96 and the original sample value was 0.001
(positive sign). From these results, the hypothesis
which states that perceived Product Advantage has a
positive effect on Sustainable Business Growth is
rejected. Based on various previous studies, the
researcher developed and tested the importance of
perceived product advantage in the MLM industry
in an effort to increase sustainable business growth.
In various studies investigating product advantages
often focus on elements such as quality, uniqueness,
innovation, and performance, [30]. Product
excellence is significantly and positively related to
the market, [25]. This study examines the perceived
superiority of the product in MLM that supports the
company's long-term business growth.
5.8 Relationship of Perceived Product
Advantage and Network Externalities
It was found that the T-statistical value (0.747) <
1.96 and the original sample value was 0.001
(positive sign). From these results, the hypothesis
which states that perceived product superiority has a
positive effect on network externalities is rejected.
Unique products and products that solve customer
problems are also considered important in building
product advantages. The concept of product
excellence influences consumer purchasing
decisions, forming a strong reason for product
adoption by the market, [25]. Perceived quality can
be defined as a consumer's assessment of the
superiority or superiority of the product as a whole.
This perception-based approach views quality as a
form of overall evaluation of a product, showing
that quality is a relatively global value, [45]. In
various studies investigating product advantages,
they often focus on elements, such as quality,
uniqueness, innovation, and performance, [46],
product advantages are significantly and positively
related to network externalities.
5.9 Network Externalities affect the
Company's sustainable Business Growth
It was found that the T-statistical value (4.844) >
1.96 and the original sample value was 0.357
(positive sign). From these results, the hypothesis
which states that network externalities have a
positive effect on the company's sustainable
business growth is accepted, [47]. Empirical results
show that for luxury and necessity products, direct
network externalities have a positive impact on
customer recommendations, while network
externalities have an indirect negative impact on
customer recommendations. This study extends the
theory of network externalities and proves that
network externalities are an important way for
companies to gain competitive advantage that
improves business performance, [48]. This shows
that network externalities have two dimensions,
namely direct and indirect externalities.
6 Conclusion
Based on the results of hypothesis testing, it shows
that Training and Development has a positive effect
on Sustainable Business Growth, Training and
Development has a positive effect on Network
Externalities, Compensation and Reward System
has a positive effect on Sustainable Business
Growth, Compensation and Reward System has a
positive effect on Network Externalities, Digital
Adoption Capability does not affect Sustainable
Business Growth, Digital Adoption Capability has a
positive effect on Network Externalities, perceived
Product Advantages have no effect on Sustainable
Business Growth, perceived Product Advantages
have no effect on Network Externalities, and
Network Externalities have a positive effect on the
Company's sustainable business growth. From a
strategic management perspective, especially from a
Resource-Based Theory point of view, companies
with unique capabilities and resources can achieve a
position of sustainable competitive advantage in
volatile business markets and outperform
competitors in their industry. This research shows
how big the role of network externalities and
strategic agility in building and strengthening the
performance of a company. So that network
externalities can be recognized as very valuable
resources, are step-by-step, not easily imitated, and
cannot be replaced as is the nature of RBT. Where
the development of network externalities is not only
in communication products, but also applies to daily
use products and physical products that are used by
many people.
WSEAS TRANSACTIONS on BUSINESS and ECONOMICS
DOI: 10.37394/23207.2023.20.36
Thamrin Selamet, Tirta Nugraha Mursitama,
Asnan Furinto, Pantri Heriyati
E-ISSN: 2224-2899
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Volume 20, 2023
The limitations of this study include the
sampling technique carried out by the convenience
technique, namely the sampling is taken as is. Data
is collected over a short period of time so it is less
likely to see consistency over a longer period.
Suggestions for future research can include cultural
variables. Culture consists of 5 (five) cultural
dimensions, namely: Individualism, Collectivism,
Power Distance, Uncertainty Avoidance and
Masculinity.
The strategic implication of this research is that
this research shows how big the role of network
externalities and strategic agility in building and
strengthening the performance of a company. So
that network externalities can be recognized as very
valuable resources, are step-by-step, not easy to
imitate, and cannot be replaced. Where the
development of network externalities is not only in
communication products, but also applies to daily
use products and physical products that are used by
many people. So that the understanding of network
externalities becomes more comprehensive and its
existence becomes clearer in the world of
management, especially marketing science. This
shows that externalities directly and indirectly affect
the number of customers who use products or
services in MLM, to maintain the sustainability of
the company, MLM actors must be able to develop
network externalities either directly or indirectly.
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Contribution of Individual Authors to the
Creation of a Scientific Article (Ghostwriting
Policy)
-Thamrin Selamet is the main author of this
article and also plays a role in analyzing the
statistical data generated in this study.
-Tirta Nugraha Mursitama is an expert in the field
of research management, he is very helpful in
providing input and input in this research so
that it can produce quality research.
-Asnan Furinto is an expert in the field of
economics and research management, she is
also an expert in the field of economics so she
is very instrumental in providing input on the
use of theories in this research in order to
produce quality research.
-Pantri Heriyati is an expert in input research
methodology; he plays a role in providing input
and in this research so that it can produce
quality research.
Sources of Funding for Research Presented in a
Scientific Article or Scientific Article Itself
All funding in this study came from private
funding.
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DOI: 10.37394/23207.2023.20.36
Thamrin Selamet, Tirta Nugraha Mursitama,
Asnan Furinto, Pantri Heriyati
E-ISSN: 2224-2899
399
Volume 20, 2023
Conflict of Interest
The authors have no conflicts of interest to declare
that are relevant to the content of this article.
Creative Commons Attribution License 4.0
(Attribution 4.0 International, CC BY 4.0)
This article is published under the terms of the
Creative Commons Attribution License 4.0
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