Introduction
Small and medium enterprises (SMEs) play an important role in supporting state finances, both in developed and developing countries: New Zealand, India, Sri Lanka, China, Malaysia, Indonesia (Ambarwati et al., 2022; Apak & Atay, 2014; Darroch, 2005; Ha et al., 2016; Huang & Li, 2009; Kumarawadu, 2008; Kuncoro & Suriani, 2018; Meutia Sistarani, Abdullah Umar, 2018; Misnatun & Satrio, 2020; Wijaya & Suasih, 2020). SMEs have the advantage of absorbing a large number of workers while using relatively large local resources, as a chain to distribute development results and support various types of industrial sectors (Oly Ndubisi et al., 2011). Barriers to the development of SMEs in Indonesia can be grouped into two constraints, namely external and internal. External barriers include (1) limited access to business financing caused by high funding and guarantee costs, (2) high infrastructure costs due to high logistics costs stemming from poor quality roads, ports, airports, funding, and legal issues; and (3) inefficient bureaucratic services caused by the high level of corruption and the ratio of civil servants compared to the high population. Internal barriers include (1) institutional and human resources, (2) marketing and technology, and (3) intellectual capital (Wijaya & Suasih, 2020)
Today, businesses face intense competition among business people and the risk of losing customers easily. Business people do not understand and respond to rapidly changing market trends. The role of knowledge is needed to shift to knowledge management practices, and the need for effective supply chain management practices is increasing over time due to the globalization of the market, and increasingly intensive competitive situations exist in the market (Ha et al., 2016; Ploenhad et al., 2019). To maintain their existence, SMEs must have knowledge management skills and supply chain management to increase their competitive advantage compared to competitors. This study aims to analyze the role of knowledge management and supply chain management in improving company performance through the mediating role of competitive advantage. The novelty in this research is the deepening of a competitive advantage that acts as a mediating variable. It is very feasible to be tested based on the idea that it is assumed that with a competitive advantage, it can help MSME businesses improve performance so that MSMEs can create optimal profits, sales growth, the ability to export and import products. At the same time Competitive Advantage, helping companies move dynamically in non-economic matters, such as consumer satisfaction and goal success (J. Chen et al., 2016). Competitive Advantage can provide a trigger for MSMEs to develop their business both in improving management and product innovation (Ismail & Alam, 2019).
Knowledge Management (KM) is an important strategy for organizations that want to achieve competitive advantage in the era of a knowledge-based economy (Khaliq, 2016). However, other findings show that Knowledge Management which focuses on technology alone has no effect on competitive advantage (Pingkan et al., 2023). Supply chain management has a significant effect on competitive advantage (Jamaludin, 2021). On the other hand, supply chain management is actually unable to increase competitive advantage (Silitonga et al., 2023). Knowledge management has a significant effect on company performance (Rezaei et al., 2021), but different findings state that knowledge management cannot improve company performance (Lisetyaningrum & Padmantyo, 2024; Wijaya & Suasih, 2020). Supply chain management has a significant effect on company performance (Hilal, 2022). However, previous findings actually found different things where supply chain management had no effect on company performance (Caliskan, 2016). Competitive advantage has a significant effect on company performance (Utarayana & Sudiartha, 2021). However, research conducted by (Sipayung et al., 2021) shows results where product quality, which is a representation of competitive advantage, cannot improve company performance. These various results of previous research encourage researchers to explore the mediating role of competitive advantage in order to improve company performance. Because with competitive advantage, companies will tend to be oriented towards managerial quality, so researchers analyze the role of competitive advantage in order to mediate the relationship between knowledge management and company performance (Hu et al., 2022).
Several studies show inconsistent results regarding the mediating role of competitive advantage. This can be caused by several factors (Alnoor, 2020). Several studies show that competitive advantage indeed mediates the relationship between supply chain management and company performance (Agung & Syafii, 2023; Sari & Sartika, 2022), while other studies show no mediation effect (Wahyudi & Kurniawan, 2021; Sari et al., 2022). Based on the various phenomena and research gaps mentioned above, the researcher aims to analyze: 1. Does knowledge management have an effect on company performance? 2.) Does supply chain management affect company performance? 3.) Does knowledge management have an effect on competitive advantage? 4.) Does supply chain management affect competitive advantage? 5.) Does competitive advantage affect company performance? 6.) Does competitive advantage mediate the relationship between knowledge management and company performance? 7. Does competitive management mediate the relationship between supply chain management and company performance? It is hoped that the results of this research will be used as material for consideration in making managerial decisions that focus on the role of competitive advantage. It is also hoped that the results of this research can expand empirical findings related to company performance and can be useful for future findings.
Literature Review
Corporate performance is a very broad management topic. Management researchers have studied several factors and their influence on company performance. The key performance measures of a company include financial measures such as Earning Per Share (EPS), Return of Assets (ROA), Return of Equity (ROE) Return of Sale (ROS), among others (Adetunji & Owolabi, 2016). In this study, the company 's performance will be tested on how the variables of knowledge management and supply chain management can improve the performance of an SME.
Knowledge management
As one of the important resources of corporate organizations, knowledge must be successfully recognized, captured, stored, shared, and linked in the most productive way to achieve a competitive economic advantage (Misnatun & Satrio, 2020). SMEs appear to be more dependent on the advancement of their personal abilities to support progress (Wijaya et al., 2019). Therefore, knowledge is seen as the most vital and competitive asset. Given the importance of knowledge, business visionaries are motivated to create capacity in monitoring information so that they become more competitive and imaginative (Ha et al., 2016). Knowledge management is an integrative systematic process used to coordinate organizational activities, identify cognitive needs, transfer, store, share, and apply knowledge related to culture and business strategy (Alrubaiee et al., 2015; Byukusenge & Munene, 2017). Human resources or knowledge management is a resource that can create a sustainable competitive advantage (Kamya et al., 2010). Successful knowledge management applies various approaches to organizational knowledge – including its accumulation, utilization, sharing and ownership (Rasula et al., 2012). KM is a process that, through the creation, collection, organization, and utilization of knowledge, helps to achieve goals and improve organizational performance. KM also consists of strategy, cultural values and workflow (C. J. Chen & Huang, 2007). Knowledge Management (KM) is becoming increasingly important for MSMEs to improve their competitiveness and performance. By following the latest trends, overcoming challenges, and implementing the advice provided, MSMEs can utilize KM to achieve their goals (Durst et al., 2024).
H1. Knowledge management has a significant effect on competitive advantage.
Supply Chain Management
There are five key processes in the supply chain; purchasing, production, distribution, storage, and sales (Handoko et al., 2015). Successful supply chain management requires cross-functional integration, and the role of marketing must play an important role. The challenge is to determine how successful or not to achieve this integration (Lambert & Cooper, 2000). The integration of supply chain management systems has been the subject of much research and debate. As organizations seek to develop more effective partnerships and information relationships with trading partners, internal processes become interlinked and span the traditional boundaries of the company (Power, 2005). Research in supply chain management is increasingly applying theories and conceptual contributions drawn from the strategy literature (Hsu et al., 2009). The balance of power in the supply chain can play an important role in digital technology adoption and innovation performance in SMEs. By understanding these dynamics, SMEs can maximize the benefits of digital technology to increase their competitiveness and innovation, especially in managing supply chains (Zimmermann et al., 2024).
H2. Supply chain management has a significant effect on competitive advantage.
H4. Supply chain management has a significant effect on company performance.
Competitive advantage
Competition is one of the cores of the success or failure of a company. It refers to the suitability of company activities that contribute to company performance, such as innovation, a cohesive culture, and the implementation of the creation of goods (Weil, 1985). Competitive advantage is a concept that is often used to inspire in the form of strategies and the ability to imitate the strategies that are most often used to achieve company success (Christensen, 2001). It describes a superior position based on providing superior customer value or achieving lower relative costs, resulting in market share and profitability performance. Even though the competitive advantage is one of the concepts in increasing research, most of these studies were conducted on large-scale companies, but quite less researched on small-scale companies. (O’Donnell et al., 2002). Innovation can give a company a competitive advantage and profit, but it does not last forever. Success brings in imitators, who respond with superior features, lower prices, or the like in new ways to attract customers (Williams, 1992). It agrees with that expressed by (Guarda et al., 2013) the importance of the role of business intelligence in optimizing technology and innovation to improve the performance of SMEs. Then further, (Bennett & Smith, 2002), in the study, revealed that increasing skills, exports, and innovation is one way to reduce competition but has a weak effect on increasing skills. These results also imply that location differences have little to do with a competitive advantage. However, the research conducted by (Farhikhteh et al., 2020) in increasing competitive advantage for SMEs, CRM and knowledge management play an important role in achieving SME profitability at a macro level.
H3. Knowledge management has a significant effect on company performance
H5. Competitive advantage has a significant effect on company performance
H6. Competitive advantage mediates the effect of knowledge management on company performance
H7: Competitive advantage mediates the effect of supply chain management on company performance
Methodology
This study uses quantitative methods with a causal research approach. The population in this study were all SMEs in Palu City, Indonesia during December 2023 – March 2024. The purposive sampling technique did sampling. First, data were collected using a questionnaire with offline and online distribution with the help of Google Forms. The questionnaires were distributed using a Likert scale. After the data is collected, then it is analyzed using Structural Equation Modeling (SEM) with the help of Smart-PLS software. Path analysis testing is done by testing the validity and reliability. Furthermore, testing the influence between the influence between variables. The following explains the description of the relationship between variables:
Result and Discussion
After the data is collected, the next step is to analyze it using Smart-PLS software. The results are presented in the output tables below:
Based on the results above, it can be seen that all constructs have an AVE value of more than 0.5, so from these results, it can be concluded that all constructs are declared valid. Furthermore, these results also indicate that all constructs are declared reliable, according to the value on Cronbach Alpha, which is more than 0.6.
Based on the test results directly (direct effect) by looking at the output of the PLS Algorithm above, the data shows that the first hypothesis, namely knowledge management has a significant influence on competitive advantage with a P-Value value of (0.000) smaller than 0.05. So it can be concluded that H1 is accepted. On the other hand, the results of the second hypothesis test show that there is no significant effect between supply chain management on competitive advantage with a P-Value of 0.679 or greater than 0.05. So based on these results, then H2 is rejected. On the other hand, the results of the third hypothesis test show a significant influence between knowledge management on company performance with a P-Value of 0.058 less than 0.05, so H3 is accepted. Then the fourth hypothesis test results also have a significant influence on supply chain management on company performance with a P-Value of 0.030, so H4 is accepted. Finally, the fifth hypothesis test results also show a significant influence between competitive advantage and company performance with a P-Value of 0.024; with these results, the hypothesis test (H5) is accepted.
Based on the test results indirectly (indirect effect) by looking at the output of the PLS Algorithm above, the data shows that the results of the sixth hypothesis test have a mediating effect between knowledge management on company performance with a P-Value value of 0.016 or less than 0.05, so that from the results then H6 is accepted. However, the seventh hypothesis test results do not show a mediating effect between supply chain management on company performance because the P-Value value is 0.757 or greater than 0.05, so it can be concluded that H7 is rejected.
Based on the first hypothesis test results, a significant effect was obtained where the P-Value value was 0.000 or less than 0.05. These results are consistent with several studies revealed by (Halawi et al., 2005; Kamya et al., 2010; Wijaya & Suasih, 2020), which state that the role of knowledge management is important in increasing competitive advantage for company performance. It implies that with an increasing competitive advantage, SMEs can compete with their competitors and become a differentiator from other businesses, increasing core competencies for SMEs. On the other hand, based on the results of the second hypothesis test, an insignificant effect was obtained where the P-Value value was 0.679 or greater than 0.05. These results follow the research conducted by (Khaddam et al., 2020) that part of the supply chain management component, namely the role of distributor intermediaries, has no significant effect on competitive advantage. It means that the role of location and supplier selection is not given much attention in carrying out the activities of SMEs. However, even though the supply chain directly does not significantly affect competitive advantage, it can affect the company’s performance. The implication of these results illustrates that SMEs still pay attention to the role of supply chain management to improve their company’s performance.
Based on the results of the second hypothesis test, a significant effect was obtained where the P-Value value was 0.058, so that according to these results, the third hypothesis was accepted. In line with these results, several studies similar to those disclosed by (Corral de Zubielqui et al., 2019; Li Sa et al., 2020; Wang et al., 2014; Wang & Wang, 2012) state that knowledge management consists of internal and external knowledge can improve company performance, and this can also increase competitive advantage through an update of performance results. This result also has implications for SMEs because it can be a basis for achieving superior company performance ineffective business implementation and can improve company performance. Finally, based on the results of the fourth hypothesis test, there are significant results between supply chain management and company performance where the P-Value value is 0.030. These results are consistent with several studies conducted by (Beheshti et al., 2014; Flynn et al., 2010; Lee et al., 2020; Ou et al., 2010), state that the role of supply chain management is very influential on improving company performance. It also not only affects the company’s performance, but can also affect the operating performance and can indirectly increase customer satisfaction.
Based on the fifth hypothesis test results, significant results were obtained following the P-Value value of 0.024 or less than 0.05. These results are in line with research revealed by (Khan et al., 2019; Leitner & Güldenberg, 2010; López-Gamero et al., 2009) which states that the competitive advantage component consisting of differentiation strategy and strategy in cost has a significant effect on company performance. These results imply that SMEs must always maintain the advantages of unique and different products from their competitors and are always oriented to costing strategies so that SMEs have a competitive advantage and can improve company performance. Based on the fifth hypothesis test results, it was found that the mediating effect of knowledge management on company performance through competitive advantage with a P-Value value of 0.016, so based on these results, H5 is accepted. These results are in line with research revealed by (Kamya et al., 2010), which states that organizations that implement knowledge management in their activities can contribute to increasing competitive advantage through understanding the use of technology and new product innovations so that This also leads the company to improve company performance.
Based on the seventh hypothesis test results, it was stated that the mediation effect was not significant where the P-Value value was 0.757 or greater than 0.05. These results follow the research conducted by (Khaddam et al., 2020) state that part of the supply chain management component, namely the role of distributor intermediaries, has no significant effect on company performance. This result implies that although in his research several components of SCM can have a significant effect on company performance, considerations about distribution cannot significantly affect company performance, meaning that distance and location considerations do not really play a role in influencing company performance. Of course, this result also impacts competitive advantage where company performance is one of the factors of increasing or decreasing competitive advantage (Khan et al., 2019; Leitner & Güldenberg, 2010; López-Gamero et al., 2009).
Conclusion
Based on the results obtained in this study, it can be concluded that the importance of knowledge management in achieving competitive advantage from SMEs is important. Increased competitive advantage occurs from two factors, namely product differentiation strategies and pricing, which can increase the competitive advantage of competitors and increase SMEs’ profitability. Improving the performance of SMEs is also inseparable from the role of supply chain management, such as delivery time, product quality, raw material price management design, cost suppression greatly affects the company’s performance to succeed. These results can have implications for the academic environment and for policymakers, in this case, SMEs. It is hoped that the results of this research can build a culture focused on innovation and invest in research and development from a practical perspective. The results of this research are also useful for future researchers in that there are forms and types of competitive advantage that can be achieved and how this can improve company performance. For public authorities the results of this research can create an environment conducive to innovation and entrepreneurship by providing resources and incentives for companies to invest in R&D and launch new products and services.