E-Commerce Performance Based on Knowledge Management and Organizational Innovativeness

Abstract

Purpose: This study focuses on the performance of the strategy of Indonesia's companies in facing the development of e-commerce business. The relationship between Knowledge Management (Organizational Memory, Knowledge Sharing, Knowledge Absorption, Knowledge Acceptance), Organizational Innovativeness, Competitive Advantage (Time, Quality, Cost, Flexibility) and E-Commerce (Humanistic Factors: Management, Competence, Organizational Structures) examined in this case study. Research design, data, and methodology: This study uses two types such us qualitative and quantitative. A survey approach were conducted to collect data from the Group of Companies (Director and Manager), Academician (Lecturer), Regulator (Head of Government Institution Division), and Master of Management (at least five years). Total of 114 samples was collected and processed for statistical analysis using Smart PLS. Results: This study provide the findings proved that Knowledge Management and Organization Innovativeness simultaneously have positive influence on Competitive Advantage, while Knowledge Management, Organization Innovativeness, and Competitive Advantage simultaneously have positive influence on E-commerce where Competitive Advantage positively influence to E-commerce. Conclusions: The implementation of strategies or steps in this study are expected to steer and motivate an organization to successfully implement a good knowledge management system to pass on knowledge from generation to generation in the company Organizational Innovativeness strategies to improve e-commerce performance.

1. Introduction

The development of the current economic growth with the current globalization led to the digital era to meet the demands of people needs. This digital era cannot be separated from e-commerce, where the function of e-commerce as a medium to be a collection of technologies, applications, and businesses that connect companies or individuals as consumers to conduct electronic transactions, exchange of goods, and exchange of information through the Internet or another computer network (Razak et al., 2019; Indahingwati et al., 2019; Mansur et al., 2019). These changes have caused some new problems faced by various groups that demand all business people to find various solutions and strategies that will be applied to survive to have a competitive advantage through the characteristics and resources of a company to have a higher performance compared to other companies in the same industry or market.

The impact of these changes and challenges also applies to companies in Indonesia to actively confront and find solutions to survive in this digital era with strategies that can improve performance in e-commerce as a means to meet the needs of their customers. This is also supported by the market share of Indonesia itself and the culture of its people that are quick in adopting things related to technology. Figure 1 presented the growth of e-commerce sales in Indonesia. The data showed that e-commerce sales in Indonesia are increasing significantly every year.

Table 1: The Growth Rate of E-Commerce Sales in Indonesia

Source: Statista (2019)

Based on these changes and challenges, many companies in Indonesia, both profits and non-profits realize that it is very important to have appropriate Knowledge Management and Organizational Innovativeness in providing services to create or maintain Competitive Advantage of companies or organizations (private, government, individuals) in the E-Commerce era currently. This is supported by companies or organizations that are not ready to face the current technological developments in marketing, producing, and providing services got many problems. This study focuses on the performance of thestrategy of Indonesia‘s companies in facing thedevelopment of e-commerce business. The purpose of this study is analyze and investigate the relationship between Knowledge Management (Organizational Memory, Knowledge Sharing, Knowledge Absorption, Knowledge Acceptance), Organizational Innovativeness, Competitive Advantage (Time, Quality, Cost, Flexibility) and E-Commerce (Humanistic Factors: Management, Competence, Organizational Structures). We hope, results of this study can contribute to the development of knowledge in the field of strategic management and can have an impact on industry players

2. Literature Review

2.1. Knowledge Management

Effective learning processes are linked to exploration, exploitation, and sharing of human knowledge (tacit & explicit) using appropriate technologies and cultural environments to enhance an organization's intellectual capital and performance (Jashapara & Tai, 2011). There are four important dimensions of Knowledge Management:Organization memory; Sharing knowledge; Absorption of knowledge and Acceptance of knowledge. These four dimensions of knowledge management measurement have been examined and tested by (March & Olsen, 1976; Cohen & Levinthal, 1990; Prahalad & Hamel, 1994; Nonaka & Takeuchi, 1995; Mack & Szulanski, 2017; Popper & Lipshitz, 1998; Davenport, Davies, & Grimes, 1998;Hansen, Nohria, & Tierney, 1999; Cross & Baird, 2000; Alavi & Leidner, 2001; (Becker, 2001; Gray, 2001; Hult, 2003; Wang, Ahmed, and Rafiq, 2008; Naidah & Iskandar, 2015).

2.2. Organizational Innovativeness

Innovation can be present in various forms, such as product or process innovation, radical or incremental innovation, administrative or technological innovation, and others. (Matinaro & Liu, 2017; Camisón-haba, Clemente-almendros, & Gonzalez-cruz, 2018; Valdez-juárez, Solano-rodríguez, & Philippe, 2018).

The importance of different dimensions is emphasized by the authors. For example, (Witell et al., 2016) suggested various possible innovative alternatives, namely developingnew products or services, developing new production methods, identifying new markets, finding new sources of supply, and developing new forms of organization. Miller and Friesen (1983) focus on four dimensions: innovation of new products or services, methods of production or service delivery, risk-taking by key executives, and seeking unusual and new solutions. Wang, Campus, and Campus (2004) adopted three dimensions of innovation: market innovativeness, strategic tendency to be a pioneer, and technological sophistication. They are product innovation, market innovation, process innovativeness, behavioral innovation, and strategic innovation. Research that emphasizes these different dimensions is briefly summarized in Table 2. In line with this perspective, we define organizational innovativeness as the overall innovative ability of companies to introduce new products to markets, or open new markets, by combining strategic orientation with innovative behavior and processes, measured by using dimensions or indicators.

Table 2: Organizational Innovativeness Dimension or Indicator

Source: Wang et al. (2004)

2.3. Competitive Advantage

Ability gained through the characteristics and resources of a company to have a higher performance than other companies in the same industry or market. (Hwang & Kim, 2018) suggested that companies compete in the market on one or more of the following competitive priorities: time, quality, and cost, along with flexibility. Many researchers (Tutar, Nart, & Bingöl, 2015), (Jiang & Zhang, 2016), (Barney, 2011), (Ramune Ciarniene, 2015) found that the original concept of competitive priority suggested by (Clark & Oey-Gardiner, 1991) is suitable for analyzing the impact of innovation on competitive advantage. The critical success factors identified for the implementation of e-commerce strategies have been developed into models for the visualization of understandable theoretical frameworks shown by Figure 1 below (Johansson, 2015):

Figure 1: Factors for successful e-commerce strategy implementation

Source: Johansson (2015)

Critical success factors for the implementation of e-commerce strategies have been compiled into a visualization model of understandable theoretical frameworks. Critical success factors are divided into two main groups, humanistic factors, and non-humanistic factors. The factors are categorized according to whether the main concern of these factors is inherent in human resources in the organization or not. This criterion is the reason why management, technological competence, and organizational culture are categorized as humanistic factors, and they pay attention to changes in human capital.

The remaining factors are categorized as non-humanistic factors because they do not imply a direct relationship with human resources like other factors. Instead, they focus more on monetary and structural issues in the organization, and the labels collected for these factors are therefore contrary to humanistic factors - non-humanistic factors. The purpose of the circular structure of this model is to symbolize that all critical success factors are connected and oppose the impression that several factors are more important than others. The aim is to give an interpretation of a cycle without the starting or ending points mentioned because there are no consistent recommendations about what activities should be identified in theory. Besides, it is not debated that work with success factors must be resolved before starting to involve others. It's more about working with several factors simultaneously rather than ranking them in a certain order.

3. Research Methods and Materials

This study using purposive (judgmental) sampling in determining the sample. Assessment sampling is done by selecting sample members based on certain criteria (Cooper, Schindler, & Sun, 2006). Researchers used a particular consideration of the elements selected as the sample population. Members of the population selected as samples are determined directly by the researcher so that there is no opportunity for other members of the population to be sampled if out of consideration of the researcher.Judgmental sampling conducted by select or determine sample based on specific considerations and guidelines of the researcher.

In this study using qualitative data, namely this research based on seeing an object which includes observation/observation, interviews, literature studies, and questionnaires. Respondents in this study consisted of actors, users and e-Commerce observers in various Companies (Directors and Managers), Academics (Lecturers), Head of Division of Government Agencies (Regulators) and Masters in Postgraduate Student Management with a minimum of 5 years experience. Where sampling of respondents is done by non-probability sampling techniques.

This research method uses the random sampling method that is the sample chosen is really in accordance with the criteria of the research conducted. The number of samples in this study was as many as 114 respondents. The descriptive analysis here is an analysis of respondents who have participated. The characteristics and background of these respondents vary; therefore it is necessary to qualify to reflect the characteristics of each respondent. The results of the characteristics of respondents who have been analyzed and processed using SPSS are listed in table 3.

Table 3: Demographics of the respondents

Source: Own, 2019

The measurement scale used in this research is the semantic scale from one to seven. This measurement scale was developed by Osgood (Osgood, C. E., May, W. H., and Miron, M. S. "Cross-Cultural Universals of Affective Meaning." Urbana, IL: University of Illinois Press, 1975).This scale is arranged in a continuous line. A very positive answer (very good) is located on the right of the line, and a very negative (very bad) answer is located on the left or vice versa. The data obtained is interval data, and usually this scale is used to measure certain characteristics possessed by the object of research. According to (Sedarmayanti, 2002) and (Meiyani & Putra, 2019), assessment on a semantic scale can be more profound than when using a Likert scale, since scores of semantic scales are considered to have interval level measurements to allow for the calculated average and standard deviations. To avoid ambiguous or biased answers, the alternative choices of respondents are omitted to be six scale.

Validity test is carried out to determine whether or not the questionnaire distributed. The decision to test the validity of the respondent uses a significance level if the items of the respondents' questions if r count is greater or equal to r table (r count ≥ r table). The research instruments besides being valid, they must also be reliable (reliable). Therefore the reliability test is used to find out the accuracy of the questionnaire value, meaning that the research instrument if tested in the same group even though at different times the results will be the same. instruments can be said to bereliable if the results of Cα count> Cα table. Cronbach's Alpha Coefficient (Cα) is the most commonly used statisticto test the reliability of a research instrument. A research instrument is indicated to have an adequate level of reliability if the Cronbach alpha coefficient is greater or equal to 0.70.

Table 4: Validity and Reliability Results

Source: Own, 2019

Figure 2: Research Model

This study discusses four variables, namely the Knowledge Management and Innovative Organizational variables as independent variables and Competitive Advantages and E-Commerce as the dependent variable.Independent variable is a variable that can influence other variables that are not free (dependent variable) while the dependent variable (dependent variable) is a variable that can be influenced by other variables (independent/free variables). This model explains the problem to be examined so that there are no errors in interpreting variables and terms of reference for researchers in describing the problems to be studied.

H1:Knowledge Management and Organization Innovativeness simultaneously affect Competitive Advantage.

H2:Knowledge Management, Organization Innovativeness, and Competitive Advantage simultaneously affect E-Commerce

H3:Organization Innovativeness mediates the relationship between Knowledge Management and Competitive Advantage.

H4:Organization Innovativeness mediates the relationship between Knowledge Management and E-Commerce.

H5:Competitive Advantage mediates the relationship between Knowledge Management and E-Commerce.

H6:Competitive Advantage mediates the relationship between Organization Innovativeness and E-Commerce

4. Results and Discussion

4.1. Structural Analysis

The structural model is a model that connects exogenous latent variables with endogenous latent variables or endogenous variable relationships with other endogenous variables. In this study, the structural model is related to six research hypotheses which imply a causality relationship between latent variables. There are four latent variables with 19 manifest variables. The latent variable Knowledge Management consists of 4 manifest variables;Organizational Innovativeness consists of 5 manifest variables. Competitive Advantage consists of 4 manifest variables and E-Commerce consists of 6 manifest variables. By using the second-order estimation method from Partial Least Square, the path diagram is obtained as below:

Figure 2: Path Diagram Full Model X1, X2,Y,Z with Manifest Variables

Figure 2: Path Diagram Full Model X1, X2,Y,Z with Manifest Variables

Table 5: Path Coefficient X1, X2, Y,Z

Based on the test results, it is proven that all hypotheses (H1, H2, H3, H4, H5)

4.2. Structural Model Testing

The structural model was evaluated using t-value and coefficient determination (R2). The value of R2 indicates the number of variants in the endogenous variable which can be explained simultaneously by exogenous latent variables. Table 6 showed the results of R Square:

Table 6: R-Square

The total value of R2 is used to calculate the Goodness of Fit (GOF) because in smart pls there is no special menu to calculate the GOF. The value of GOF is used to indicate whether a model is fit. So the value of Goodness of Fit (GOF) is as follows:

Gof = Q2 = 1 - {(1-R1) (1-R2)) (1-R3) = 1 - (1-0.737) (1-0.445) (1-0.645) = 0.948

Table 7 shown, the value of Q2 = 0.948 means that 94.8% of the diversity of the endogenous variables is explained by the exogenous variables, the remainder is explained by other variables not found in the model. The greater the Goodness of Fit Q2 the greater the Exogenous variable can affect the Endogen variable. From the above Structural Equation can be seen R2 from each equation:

Table 7: T-value r path coefficient

ㆍOrganization Innovativeness has R2 of 0.645, and this figure indicates that Knowledge Management can explain 64,5% variant of Organization Innovativeness, while the rest is explained by other factors that are not measured.

ㆍCompetitive Advantage has R2 of 0.737, and this figure indicates that Knowledge Management and Organization Innovativeness can explain 73,7% variant of E-Commerce, while the rest is explained by other factors not measured.

ㆍE-Commerce has R2 of 0.445, and this figure indicates that Knowledge Management, Organization Innovativeness, and Competitive Advantage can explain 44,5% variant of E-Commerce, while the rest is explained by other factors not measured.

ㆍCompetitive Advantage as Intervening as well as an independent variable results Goodness of Fit (GOF) of 94.8%. GOF represents the overall goodness of the model.

4.3. Hypothesis testing

Based on the hypotheses test (Table 8). Between Exogenous and Endogenous variables, there are a direct and indirect effect. Hypothesis testing is done with a significance level of 5% (alpha 0.05) so as to generate a critical t-value from the table of 1.65.

Table 8: Hyphotesis Test

In this study, there are 4 Hypotheses for the indirect influence of the relationship between Exogenous and Endogenous Variables. Hypothesis analysis is done at a significance level of 5%, resulting in a critical t value (t table) of 1.65. Below are the indirect influence of Hypotheses:

ㆍ The amount of indirect effect of Knowledge Management on Competitive Advantage through Organization Innovativeness is 0.803 x 0.800 = 0.6424. So the total effect of Knowledge Management on Competitive Advantage of 0.6424 + 0.071 = 0.7134. Organization Innovativeness can mediate the effect of Knowledge Management on Competitive Advantage of 0.7134 or 71.34%.

ㆍ The amount of indirect effect of Knowledge Management on E-Commerce through Organization Innovativeness is 0.803 x 0.501 = 0.4023. So the total effect of Knowledge Management on E-Commerce is 0.4023 + 0.268 = 0.67. Organization Innovativeness can mediate the effect of Knowledge Management on E-Commerce of 0.67 or 67%.

ㆍThe Effect of Knowledge Management on E-Commerce through Competitive Advantage has no significant effect. Since one of the paths of Knowledge Management to E-Commerce relationship is not significant, the indirect and total relationship of Knowledge Management to E-Commerce is not significant.

ㆍ The effect of Organization Innovativeness on E-Commerce through Competitive Advantage has no significant effect. Since one of the pathways of Organization Innovativeness to E-Commerce relationship is not significant, the indirect and total relationship of Organization Innovativeness to E-Commerce also has no significant effect.

5. Discussion

Based on the theory implementation and practice of the relationship between Knowledge Management (Organizational Memory, Knowledge Sharing, Knowledge Absorption, Knowledge Receptivity) (KM), Organizational Innovativeness (OI), Competitive Advantage (Time, Quality, Cost, Flexibility) (CA) and E-Commerce (Humanistic Factors: Management, Technological Competence, Organizational Structures) (EC), it can be summarized . In Knowledge Management, organizational memory has a very important role that should be adjusted or considered the most in facing the development of the business world in e-commerce. This is related to the existing culture within an organization itself as the main basis of the organization. In Organizational Innovativeness, Market has a very important role that should be adjusted or considered the most in facing the development of the business world in e-commerce. This is because the existing market becomes very big and open with many competitors. In Competitive Advantage, Flexibility has a very important role that should be adjusted or considered the most in facing the development of the business world in e-commerce. This is because the organization must be flexible in implementing its strategy to improve and create Competitive Advantage.In E-Commerce, humanistic factors as Organizational Culture and Non-Humanistic Factors as Investment have a very important role that should be adjusted or considered the most in facing the development of the business world in e-commerce. Knowledge Management and Organizational Innovativeness must run in a balanced and aligned in an organization to create Competitive Advantage in facing r running the maximum strategy in E-commerce. Organizational Innovativeness is important in creating Competitive Advantage in dealing with or running the maximum strategy of E-commerce in organizations to survive.

The application of knowledge management requires the support of organizational memory to support the KM process becoming more sophisticated and integrated. While the necessary components of organizational memory (OM) are very closely related to organizational member records which include a history of competence and also performance achievement (KPI). Of course, the digital era like today, the implementation of digital technology plays an important role to support KM to be better. Another component of knowledge management is knowledge absorption which aims to provide an understanding of the internal organization to support the company's vision and mission. Efforts to create integrated knowledge management are not natural, the diversity of organizational members with different backgrounds, conditions and reasoning need urgent attention so that to support the optimal application of knowledge management training processes are required for internal organizations that are sustainable, measurable and directed (Naidah, Santosa & Soemarno, 2011). Optimizing knowledge management enables companies to achieve effective effectiveness and efficiency to support the company's competitiveness. The company's competitiveness is determined based on on-time effectiveness, quality improvement, overall cost efficiency, which is flexible. Flexibility consists of the effectiveness of SME resources, efforts to introduce new products, flexibility in production supported by technological capabilities, and product innovation-oriented in the future.The use of technology is also vital for the sustainability of e-commerce which aims to reach broader promotions, and a means to add insight to entrepreneurs in seeing market developments. Access to communication and facilitate reporting and analyze business developments owned by entrepreneurs or organizations. Knowledge Sharing and Knowledge Transfer refers more to sharing knowledge with individuals and organizations, whereas Knowledge Transfer is only limited to sharing knowledge about something we know only, for example, like discussions between friends.Knowledge Transfer refers more to the transfer of knowledge, where someone who provides such knowledge has particular expertise in the field that they have mastered (expert). However, Knowledge Sharing and Knowledge Transfer have the same goal, which is to provide benefits to individuals and organizations. Knowledge Sharing relies on several fundamental aspects such as; Organizational internal commitment, business perception, employee engagement, and synergy Integrated decision-making management. Innovation in the business world has several important aspects such as the application of the latest marketing ideas in the modern business world, the development of new designs, knowledge of business and integrated management governance, the ability of Research and Development (R&D) to the effort of sharing and involving employees (Share of employee) as a form of maximizing the application of innovation ideas. In the production process is not only based on access to quantity and quality of products but also interconnections involving internal and external parties of a business through time optimization and optimal cooperation that is built between the company's private and foreign companies, in this case, prospective consumers as end-users.

Theoretical Implication and Managerial Implication:Pressure from competitors in the market is extreme. Both in the development of new products on the market, continuous improvement in production processes even the introduction of the original product. All of them are pressures and threats so that the orientation of the industry must be able to synergy with the development of e-commerce. The e-commerce industry cannot stand alone to face the challenges and changes in innovation efforts, and the application of knowledge management is one of the keys to success in breaking through the competition.

6. Conclusions

Based on the results of this study, we can conclude that each variable has a significant and positive influence on other variables for improved performance in e-commerce and or improve the Competitive Advantage in E-commerce.So that the existence of this research is expected to be a reference in implementing the strategies or steps that will be taken by decision-makers in an organization in improving performance in the current e-commerce era, such as Knowledge Management and Organization If Innovativeness increased, then it will rise Competitive Advantage. If the Organization Innovativeness and Competitive Advantage is increased, then the E-Commerce will increase. Organization Innovativeness can be a means of an organization to improve its Knowledge Management to improve Competitive Advantage. Organization Innovativeness can be a means for an organization to improve its Knowledge Management to improve E-Commerce performance. Competitive Advantage can be a means for an organization to improve its Knowledge Management to improve E-Commerce performance. Competitive Advantage can be a means for an organization to increase its Organization Innovativeness to improve E-Commerce performance.

From the implementation of strategies or steps above are expected to help steer and motivate an organization to successfully implement a good knowledge management system to pass on knowledge from generation to generation in the company Organizational Innovativeness strategies to improve e-commerce performance. And besides it can support the development of science, especially in the field of knowledge management, Organizational Innovativeness, competitive advantage and e-commerce that can later be used as a reference for other researchers in the future in research related problems.