THE ROLE OF INNOVATION STRATEGY IN INCREASING COMPETITIVENESS AND THE ITS EFFECT ON BUSINESS PERFORMANCE

This study is conducted based on a research background that competitions are more intense after the enactment of Asean Economic Community (AEC) 2015. Consequently, all businesses including small and medium enterprises in the Silver Industry in Bali experience competitive pressure which affects the competitiveness and performance achievement of their business. To anticipate this threat, businesses in the silver industry must develop various business innovations including product innovation, process innovation, marketing innovation, and other business innovations in order to improve competitiveness and business performance. The population of this research are all the managers of the Silver businesses in Bali with a sample size of 112 people and the data analysis technique is the SEM analysis. Results have shown that industrial competition positively and significantly influence the implementation of innovation strategy and competitiveness, but it negatively and significantly influence business performance. Implementation of business strategy also has positive and significant influence on competitiveness and business performance. Subsequently, competitiveness is able to improve performance achievement of businesses. Hence, managers of silver businesses in Bali are expected to continuously develop various innovations to improve competitiveness and business performance.