Networking Capability and Learning Capability as Determinants of
Firm Performance Mediated by Business Model Innovation
PINPIN BHAKTIAR1, TIRTA NUGRAHA MURSITAMA1, IDRIS GAUTAMA SO1,
SRI BRAMANTORO ABDINAGORO1, DIENA DWIDIENAWATI2*
1DRM, BINUS Business School, Jakarta, INDONESIA
2Business Management, BINUS Business School, Jakarta, INDONESIA
*Corresponding Author
Abstract: - Business model innovation (BMI) is receiving increased attention in the firm's practice and research.
Business models have become essential for a firm to commercialize new ideas and technologies. However, the
practice of business model innovation in SMEs still needs to be improved, whereas BMI can be beneficial for
SMEs. The studies investigating dynamic capabilities as an exogenous variable for business model innovation
still need to be completed. This study aims to see the influence of networking capability and learning capability
as part of dynamics capability on business model innovation which further leads to firm performance. A
quantitative study was conducted to see the relationship. A total of 234 respondents participated in this study,
and the data were eligible for further analysis. SMART PLS version 3.3.3 was used to analyze the data. The
result showed that networking and learning capability positively influenced business model innovation, and
business model innovation positively influenced firm performance. This research validated the concept of
dynamic capabilities relationship with business model innovation. This research reinforced the statement that
the business model innovation construct is mediative. This research strengthens various studies on the positive
influence of business model innovation on firm performance.
Key-Words: Business Model Innovation; Dynamics Capability; Learning Capability; Networking Capability;
Firm Performance
Received: June 11, 2022. Revised: March 18, 2023. Accepted: April 15, 2023. Published: May 10, 2023.
1Introduction
Business model innovation (BMI) is receiving
increased attention in the firm's practice and
research. Business models have become essential
for a firm to commercialize new ideas and
technologies, [1]. The firm provides an
organization's configurational enactment of a
specific opportunity, [2], such as the consistent and
integrated description of the firm and the way to get
revenues and profit, [3]. Business model innovation
can be defined as discovering a fundamentally
different business model in an existing business,
[4]. Another expert stated that business model
innovation was also a new business logic for the
firm and new ways to create and measure the value
for its stakeholders, [5].
The emergence of new models and business
innovation becomes the background of this study. It
is also reflected by recent issues and an exponential
increase of related articles in peer-reviewed
academic journals, [6]. Business model innovation
is a central theme in entrepreneurial research, [6],
[7] considering the need for relevance of
entrepreneurs' business organizations in their
business development, [1]. The Small and Medium
Enterprises (SMEs), the research topic of business
model innovation needs to be developed to improve
its progress at the firm level, [8]. Only 35% of
European SMEs understand this concept, [9]. In
general, many business actors only understand
innovations at the product and service level, [10].
SMEs in Indonesia contribute up to 97% of
employment and 57.24% of the GDP, [11]. The
most significant business sector in SMEs in
Indonesia is culinary, which will be the focus of
this study. Indonesia's culinary industry SMEs have
an immense GDP contribution among the 16
creative economy subsectors, with the number of
actors reaching 1,249,106 with a labor absorption
rate of 7,983,259, [12]. According to data from the
Global Entrepreneurship Monitor-GEM, the
culinary sector is the primary preference for a
person to do business in Indonesia, [13]. At the
global level, the number of SMEs reaches 90% of
business actors with a labor absorption rate of 63%,
[14]. Through the development of business model
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Pinpin Bhaktiar, Tirta Nugraha Mursitama,
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innovation, it is hoped that this condition will
become the direction of a strategic posture for
SMEs because of the harmony of business, market,
and industry, [15], [16].
Dynamic capability is widely oriented to
synthesizing business model innovation, [17], [18],
[19]. Dynamic capabilities and business model
innovations aim to create value through business
organizations, [20]. Business model innovation is a
mediative variable influencing performance, [8],
[21], [22]. At the same time, the dynamic capability
requires various mediating variables to affect
performance, [23], [24]. The direction of dynamic
capability synthesis toward business model
innovation comes in two forms. First, the concept
of dynamic capabilities directly toward business
model innovation, [19]. Second, the dynamic
capabilities partially toward business model
innovation, [25]. This study used the first approach,
which seen dynamic capability can directly
influence business model innovation.
The studies investigating dynamic capabilities
as an exogenous variable for business model
innovation are still very limited. So far, the
developments have only been on the theme of
marketing capabilities, [26], firm capabilities, [27],
[28], and integration capabilities, [22], as
exogenous variables for business model innovation
constructs. Three of the above studies are in the
firm context, [22], [26], [27], and only one is in the
context of SMEs, [28]. This study aimed to develop
novelty through networking and learning
capabilities as exogenous variables for SMEs'
business model innovation.
2 Literature Review
2.1 Business Model Innovation (BMI)
Generally, a business model will be present
naturally in all businesses, whether planned or
unplanned, [29], [30]. The business model will
transform dynamically based on various
determinations to become more innovative, named
condition of business model innovation, [29].
Innovation in business models will occur in the
journey of a business organization considering that
a business model is hypothetical, [31], progressive,
[32], and prefigurative, [33]. Business model
innovation can be defined as the discovery of a
fundamentally different business model in an
existing business, [4] or a kind of new business
logic for the firm and new ways to create and
measure the value for its stakeholders, [5].
At the SMEs level, the business model innovation
needs to be carried out because it has been proven
in various empirical studies to improve firm
performance. Business model innovation for SMEs
will be a strategic process because it will be an
adoption force for (1) firms' value offerings, (2)
economic models, (3) customer relationships, (4)
internal infrastructure connected, and (5) target
markets, [7]. The development process will go
through various strategic phases, namely (1)
fundamental levels that include value creation, (2)
proprietary levels that include the development of
unique combinations, and (3) rules levels that
include stabilization.
The determination of the business model
innovation can occur due to internal and external
factors, [25], [34]. [35], stated that business model
innovation could be developed through (1) activity
system perspective, (2) perspective dynamic
capabilities, and (3) adaptive perspective. Other
studies researched the direction of developing
business model innovation research, including
developing antecedents, consequents, mediation,
and moderation, [25].
The development of a business model
innovation has a robust synthesis with the concept
of strategic entrepreneurship, resources-based view,
and dynamic capabilities, [20]. The body of
research on business model innovation has evolved
from 1981 - 2012. Research in business model
innovation and its relation with dynamic
capabilities became popular from 1972 – 2015,
[25]. The studies on those two concepts were
conducted by such as, [17], [18], [19], [25].
Dynamic capability is a concept that encourages the
presence of various capabilities, [36], [37]. This
study elaborates on dynamic capabilities, including
networked capabilities, [37], and learning
capabilities, [38], as influencing factors for
business model innovation.
2.2 Networking Capability (NC) and
Business Model Innovation (BMI)
Networking capabilities are the ability of business
organizations to utilize, develop, and make
relationships with business stakeholders for
performance, [39], [40], [41]. The statement of
networking theory is about the presence of
resources and legitimacy, [42], [43]. This
orientation is aligned with the development of
resource-based dynamic capabilities, [20], [37],
[44].
Developing networking capabilities is essential
for SMEs that often have limited resources, [45].
SMEs must deliberately develop networking
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capabilities because business relationships cannot
be carried out in an ordinary social behavior
approach, [46]. Essentially, relational relationships
are often more effective in business development
than quality transactional relationships, [32].
Networking will form the ecosystem needed by
business organizations, [47].
Networking will always be needed by business
organizations both at the stage of (1) business
opportunity development, (2) organizational
development, and (3) business establishment
orientation, [48]. Network development can be
done at the individual and organizational levels,
[49]. Through networking, business organizations
can develop (1) innovation, [50], (2) resources,
[40], (3) growth, [51], and performance, [52].
Networking will generally encourage SMEs
business organizations to be strategic, [49].
Empirically, networking capabilities have been
studied in various contexts that include (1) business
internationalization, [53], (2) business organization
relationships with suppliers, [54], (3) new product
development, [55], (4) innovation [41], and (5)
SMEs performance, [39], [41]. This finding
illustrates that networking capabilities are a
strategic construct entrepreneurial business
organizations need, [49].
The Influence of networking capabilities on the
innovation of business models is still very limited
in research. Research on the relationship between
the two constructs is still qualitative in the real
estate sector, [56]. Self-networking capabilities
have been shown to affect performance, [39], [41].
Meanwhile, business model innovation is a
mediative construct, [21], [22]. Based on these
conditions, this study wants to see the influence of
network capabilities on business model innovation.
H1: Networking Capability significantly positively
influences Business Model Innovation.
2.3 Learning Capability (LC) and Business
Model Innovation (BMI)
Learning capability is the firm's ability to learn
through various sources systematically for the
presence of a business performance-oriented
mindset and behavior, [57], [58], [59]. Through
learning capabilities, a business organization can
transform information and knowledge into strategic
strengths in business, [60]. Learning capabilities
are elaborative and essential for developing
dynamic capability studies, [38], [59], [61].
Learning capabilities are critical for SMEs because
they will change knowledge into a business
mission, [62]. This condition will make SMEs carry
out a strategic orientation in the entrepreneurial
phase they are currently undergoing, [57], [63].
Through learning capabilities, various core
competencies can be developed in a business
organization due to the acquisition and utilization
of knowledge, [43], [64].
The learning process in a business organization
can be carried out through the stages of (1)
acquisition, (2) dissemination, (3) inter-
achievement, and (4) institutionalization, [57].
Learning development can be developed at an
individual and organizational level, [62]. Learning
orientation can be carried out due to the need for
adaptive or generative learning, [65]. Learning
resources can be through (1) initial organizational
knowledge, (2) experience, (3) other organizational
conditions, (4) performance conditions, and (5) the
business environment, [57]. Learning development
is carried out to develop devices, behaviors,
capabilities, and performance, [62], [66], [67].
Management strategic learning capabilities are
oriented toward resource development, [60]. In
entrepreneurship studies, learning capabilities are
essential in developing opportunities, [57]. This
statement aligns with SMEs' need for performance
opportunities and advantages in harmony, [43],
[68]. The opportunities for development and
resources in a business organization are also in line
with the development of a business model
innovation, [17], [18], [21], [35].
Empirically, learning capabilities affect SMEs
in the context of (1) performance, [69], [70], [71],
(2) innovation, [63], [67], and (3) business
processes, [72]. The capability of self-research has
also become a mediation for the relationship of
business models to technological performance at
the firm level, [73]. At the SMEs level, it also
found some business model innovation is
influenced by learning orientation, [74], and
mediated by learning capability, [75]. This study
was intended to test the construct of learning
capabilities as antecedents for an innovative
business model.
H2: Learning Capability significantly positively
influences Business Model Innovation
2.4 Business Model Innovation (BMI) and
Firm Performance (FP)
Naturally, the business model will be present in a
business organization, and in the way of business,
the potential for innovating a business model can
be present, [20]. The business model can be
understood as the role of business organizations to
create and convey value for customers for the
presence of performance, [30]. The development of
business model innovation research is a concern for
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many researchers, [10], [25], [35], [76], [77]. The
researchers developed various measuring
instruments for the empirical research direction of
business model innovation. [76], stated business
model innovation can be estimated through (1)
reflective measurement, (2) formative
measurement, and (3) meta-measurement.
At the SMEs level, innovating business models
are challenging considering their complexity, [78].
Only 35% of SMEs in Europe practice business
model innovation, [9]. Empirically, business model
innovations have been shown to have influenced
the performance of SMEs in various studies, [8],
[21], [22], [79], [80]. Performance development for
SMEs requires exploring and exploiting
opportunities, [81].
Business model innovation is also a strategic
option in responding to business environmental
conditions. In a dynamic business environment,
business model adaptation will indeed be needed
for performance improvement [85]. Business model
innovation itself has been shown to affect the
performance of entrepreneurial organizations in
various models of business environment dynamics,
[82]. In the development of studies among
researchers, business models are indeed an
important antecedent for organizational
performance because of the contributions they
make [25].
Business Model Innovation enables SMEs to
explore external opportunities and internal
improvement, [30], leading to performance
improvement. Based on this condition, the
following is the hypothesis developed in this study:
H3: Business Model Innovation significantly
positively influences Firm Performance
Based on the hypotheses developed, the research
framework is depicted in Figure 1.
Fig. 1: Research Framework
3 Methodology
3.1 Procedure
This research was designed as a descriptive
quantitative study. Structured questionnaires were
used as the instruments for an online survey
conducted in July 2020. Statements related to the
variables and other information such as business
scale, business period, owner education, training
for management, training for employee, community
participant, number of places, and number of
menus (gender, age, location, university, and type
of university) were the content of the
questionnaires. Only questionnaires with informed
consent from respondents were included in the
analysis. For questions related to the variables that
were measured, the researcher used a Likert scale
(from 1 - strongly disagree to 5 - strongly agree). It
was used for respondents to rate their opinions. The
survey was conducted online using Google Forms.
The questionnaire was set so that each respondent
could only send one response.
3.2 Participant and Unit Analysis
The population of this research is the small and
medium-scale (SMEs) culinary businesses.
According to the government creative economy
agency, [12], the population is 1.249.106. This
research used SMEs as a unit analysis. The number
of samples was calculated using 5-10 times the
number of indicators, [83], therefore, the researcher
used a minimum of 230 samples for this study.
3.3 Measurement
All measurement scales used in this study were
measured using a framework from a previous
study. NC was measured using five items from
[39]. The items used were such as "Ability to have
good relations with suppliers," "Ability to have
good relations with customers," "Orientation of
relationships with potential business partners," and
"Orientation of relationships with potential buyers
."LC was measured using six modified items from
[59]. The items used included "Openness to new
ideas," "Respect for information," "Organizational
knowledge for business," "Work team
development," and "Renewal orientation."
BMI was measured using eight items modified
from [19], [21], [80]. The items used included "The
presence of sustainable product innovation," "The
presence of exploratory ways of selling," "The
presence of competitive service," "The presence of
special relationships with customers," "The
presence of strategic relationships with suppliers,
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"The presence of business partnerships," "The
presence of continuous business process
innovation," and "The presence of integrated
business processes."
OP was measured using five items modified
from [84]. The items used included "Annual
revenue growth," "Annual profit growth," "Growth
of new buyers every month," "Customer
satisfaction to buy Back," and "Growth of brand
recognition."
3.4 Analysis
Collected data were analyzed using structural
equation modeling (SEM) using partial least
squares (PLS) estimation with SMART PLS
version 3.3.3.
4 Result
4.1 Demographic Respondents
The majority of respondents to this research were
business owners (85%). The level of educational
involvement was also good, reflected through the
level of education of owners, who were generally
undergraduates (86%). Moreover, managers (69%)
and employees (66%) attended business training.
Respondents were from small (68%) and medium-
sized (32%) businesses. They were pretty
experienced. Most businesses have reached three
years and above (66%). Most of them had more
than one place of business (57%), had a menu
variant of more than ten (80%), and had
communities (74%). Business actors were from all
over Indonesia, both in the city center (55%) and
the region (45%).
4.2 Analysis
Table 1 showed that all indicators used for each
variable were valid and reliable. In this study, the
composite reliability (CR) of all variables is above
0.708 which is the reference value. CR of business
model innovation of 0.922, learning capability of
0.922, networking capability of 0.921, and
organizational performance of 0.925. Furthermore,
in the average variance extracted (AVE) all
variables are above the value of 0.5 which is the
reference. AVE of business model innovation of
0.597, learning capability of 0.702, networking
capability of 0.745, and organizational performance
of 0.713. In all indicators themselves, outer loading
is above 0.7 which is the reference value.
This research also resulted in an R Square for
business model innovation of 0.662 and
organizational performance of 0.498. This value is
above the expected R square reference above 0.25.
Furthermore, the normal fit index (NFI) reaches
0.752, where the fit model is expected to be closer
to 1. The study's standardized root mean square
residual (SRMR) was also within a value of 0.074
with the SRMR reference orientation to be below
0.08. Therefore, the data could be used for further
analysis.
The entire relationship between variables was
significant in the research because it had a T-
statistic result above 1.65. The whole relationship
between variables also had a positive relationship
(Figure 2).
Table 1. Measurement Model Analysis
The hypothesis in this study was carried out based
on a significant and positive relationship, so all
hypotheses were accepted in this study. Table 2
shows the conclusion of all the hypotheses in this
study.
Fig. 2: Structural Model Analysis
Variable
Indicator
s
Composite
Reliability
AVE
Outer
Loading
Business Model
Innovation
BMI1
0,922
0,597
0,818
BMI2
0,718
BMI3
0,816
BMI4
0,721
BMI5
0,753
BMI6
0,722
BMI7
0,803
BMI8
0,818
Learning
Capability
LC1
0,922
0,702
0,847
LC2
0,852
LC3
0,877
LC5
0,797
LC6
0,814
Networking
Capability
NC1
0,921
0,745
0,813
NC2
0,876
NC3
0,885
NC4
0,876
Firm
Performances
FP1
0,925
0,713
0,887
FP2
0,871
FP3
0,787
FP4
0,815
FP5
0,858
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Table 2. Hypothesis Testing
Hypotheses
Paths
t-
statistic
Value
Conclusions
H1
Networking
Capability
Business
Model
Innovation
7,573
0,458
(45,8%)
Accepted
H2
Learning
Capability
Business
Model
Innovation
4,189
0,327
(32,7%)
Accepted
H3
Business
Model
Innovation
Firm
Performance
3,319
0,325
(32,5%)
Accepted
5 Discussion
Networking capability positively affects business
model innovation, and this results in novelty.
Networking becomes a statement and an antecedent
to business model innovation, [56], and strategy,
[49]. But this research specifically used the
networking capability construct as an antecedent to
the construct of business model innovation.
Networking capabilities are essential to be
developed by SMEs because the presence of
networks will produce resources, [40], [42], [43],
[45], and opportunity, [48], that are needed for the
development of business model innovations, [7],
[30].
This finding can be an orientation for SMEs to
develop networks in a designed manner. First,
SMEs can deliberately join communities or
associations of strategic business actors to develop
business networks. Second, SMEs as entrepreneurs
can develop themselves to have the ability to relate
well with business stakeholders and also fellow
business actors to develop resources, markets, and
business models. Third, SMEs can be involved as
community administrators or business associations
to create various strategic relationships.
In this study, learning capability positively
influence business model innovation. The
relationship becomes the novelty of this study,
considering that previous studies were only
learning the development of business model
innovations, [73], [74], [75]. However, the
construct evidence was still limited because the
learning capability relationship with business
model innovation was not firm yet. SMEs were
necessary to have learning capability because it
would turn knowledge into a strategic direction,
[57], [60], [63] and create opportunities for the
development of business model innovations, [17],
[18], [21].
This finding is an orientation for SMEs to
develop learning in a designed manner. First, SMEs
can develop their organizations into learning
organizations by developing teams, methods, and
regular scheduling. Second, entrepreneurs can
develop themselves into learners. Third, SMEs can
participate in structured learning programs about
business and management through credible
institutions.
This Business model innovations research
affected performance. It was aligned with various
statements, [30], [77] and other SME empirical
research, [8], [21], [22], [79], [80]. It was
important to ensure a business model innovation for
SMEs as a predictive variable for performance,
considering that the presence of business model
innovation does not necessarily affect performance,
[21], [22].
This finding becomes a strategic orientation for
SMEs. First, business model innovation is a
strategic option for SMEs to run their business
entrepreneurial as well as strategically because
business model innovation is an operationalization
of the concept of strategic entrepreneurship.
Second, although strategic, make sure business
model innovation is oriented towards performance
creation because there are also business model
innovations that reduce performance. For example,
because the cost of business model innovation is
high. Third, this can be a strategic orientation for
entrepreneurship development in a country in
empowering SMEs.
6 Conclusion
This research produced several findings that could
be an interesting discourse. First, this research
validated the concept of dynamic capabilities
relationship with business model innovation. In this
study, dynamic capabilities include networking and
learning capabilities. Second, this research
reinforced that the business model innovation
construct is mediative. Third, this research
strengthens various studies on the positive
influence of business model innovation on firm
performance. Maintaining the relationship between
business model innovation and firms' performance
was important because it was an orientation for
MSMEs to innovate business models.
6.1. Limitations of the Research
This research had some limitations. First, the
sample size is relatively small compared to the total
population. Second, the study only tests the
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relationships in the culinary business. Third, this
research only reviews two variables, [82].
6.2 Further Research Recommendations
This study has several directions of
recommendations for future research. The first is
the development of future constructs using content-
based dimensions, structure, and governance. The
second, prospective study can specify the dynamic
capabilities. For example, using digital capabilities,
innovation capabilities, and so on. The third is
developing research contexts in various other
business sectors with a bigger sample size. The
fourth is to develop dynamic capability dimensions
based on sensing, seizing, and reconfiguring which
can also be derived from various dynamic
capability construct explorations such as learning
capabilities, networking capabilities, and others.
The fifth is to develop performance measurement
based on financial performance only. The sixth is to
make business model innovation an antecedent of
dynamic capabilities.
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Contribution of Individual Authors to the
Creation of a Scientific Article (Ghostwriting
Policy)
-Pinpin Bakhtiar, Tirta Nugraha Mursitama, Idris
Gautama So, Sri Bramantoro Abdinagoro carried
out the conceptualization, methodology, validation,
and reviewing manuscript.
-Pinpin Bakthiar also carried out the investigation.
-Pinpin Bakthiar and Diena Dwidienawati carried
out analysis, writing manuscript, and editing.
Sources of Funding for Research Presented in a
Scientific Article or Scientific Article Itself
The work was supported by the Bina Nusantara
University
Conflict of Interest
The authors have no conflict of interest to declare.
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(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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DOI: 10.37394/23209.2023.20.21
Pinpin Bhaktiar, Tirta Nugraha Mursitama,
Idris Gautama So, Sri Bramantoro Abdinagoro,
Diena Dwidienawati
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