Exploring the role of organizational creativity and open innovation in enhancing SMEs performance

Although the importance of fostering organizational creativity and open innovation is becoming more widely acknowledged, there are still few empirical evidence on the impact of creativity and innovation on enhancing SMEs performance. Moreover, previous study argued that the effect of creativity and innovation is still inconclusive, especially in SMEs. SMEs sometimes perceive that research and development is a costly activity and it doesn’t view as the activity that can directly improve performance. This study aims to examine the effect of organizational creativity and open innovation on SMEs performance. Data used in this study was collected from 206 SMEs located in several regions of Indonesia. The collected data then being analysed using PLS-SEM and this study found that all the hypotheses constructed were accepted. The findings indicate that organizational creativity and open innovation are significantly and positively influence SMEs performance. On the other hand, this study also treats organizational creativity as a second order variable that is formed from a combination of individual creativity, group creativity, internal environment, and knowledge creation where most study only consider individual and group creativity as aspect that formed organizational creativity. The result of this study provide evidence that organizational creativity that is formed by those four aspects has the ability to directly improve SME performance. Theoretically, this study contribute to the debate on how organizational creativity and open innovation can directly improve SMEs performance. Practically, this study provides insight to SMEs manager regarding how organizational creativity and open innovation can contribute to SMEs performance.