Modelling the Collaborative Advantage of SMEs in Pursuit of Competitiveness: An Emerging Economy Case

This paper examines the effect of collaborative advantage (CA) on the performance of small-and-medium-sized enterprises (SMEs). It also explains the mediation effect of a firm's capability in this relationship. Prior to examining this effect, the conceptualization of the CA model is investigated. Based on a questionnaire survey from the Indonesian SMEs, the analysis is conducted using PLS-SEM two-stage reflective-formative Hierarchical Component Model (HCM). By taking into account the unique features of SMEs, CA is conceptualized in eight constructs (collaborative commitment, collaborative efficiency agreement, collaborative risk-sharing, collaborative planning, collaborative resource sharing, collaborative relational capital, collaborative information-knowledge sharing, collaborative synchronized response) and further re-categorized into three pillars (inter-firm trust, dynamic synchronization, and resources investment). The empirical findings show that CA is positively affecting SMEs' performance, and the effect is stronger when the firm's capability is taken into account. This study contributes to the theory of CA by reformulating the constructs that fit for SMEs to strengthen inter-firm trust building and to synchronize the firm's response to changing external factors. In addition, this study also brings a new insight by incorporating relational capital as a non-price factor in motivating firms to share wider access to resources. This study also has a managerial implication that could help firm owners and/or managers to design a framework of collaboration with their peers that provides mutual benefits for all members.