Improving export performance trough innovation capability during COVID-19 pandemic: The mediation role of aesthetic-utilitarian value and positional advantage

Globalization has made exports an important activity for several companies including the growing Small and Medium Enterprises (SMEs). This is observed in the wood craft SMEs which is one of the main pillars supporting the Balinese economy when the tourism sector experienced a decline during the COVID-19 pandemic. It is important to note that innovation capability is a special asset for SME to increase exports, especially when the products have value and advantages. Therefore, this study analyzed value creation through the adoption of the Service-Dominant Logic (SDL) theory which was manifested in the aesthetic-utilitarian value variable. The study population includes all the 242 woodcraft SMEs in Bali while the samples were selected using the census method and the data obtained were analyzed through the partial least squares technique. The results showed that innovation capability has a positive effect on export performance, aesthetic-utilitarian value, and positional advantage. Moreover, aesthetic-utilitarian value and positional advantage were discovered to have a positive influence on export performance and also partially mediated the relationship between innovation capability and export performance. This implies SMEs need to develop high innovation capabilities to ensure their products are superior to those of their competitors. Furthermore, the value offered also needs to be unique and in line with customer needs.