Academic journal article International Journal of Business

The Effect of Partnership and Innovation Management on Business Performance of A Limestone Mining Company in East Java

Academic journal article International Journal of Business

The Effect of Partnership and Innovation Management on Business Performance of A Limestone Mining Company in East Java

Article excerpt


A. Research Background

The demand for limestone and its derivatives both inside and outside the industrial sector continues to grow. In addition, the potential of limestone mining industry opens up new opportunities for the growth and rise of new producers.

Limestone can be used for various purposes, namely: building blocks, building materials, road stabilizers, agriculture (calcification), ceramic materials, glass industry, industrial silica brick, cement industry, the manufacture of carbide, smelting and refining of steel, bleacher in the industry paper, pulp, and rubber, manufacture of soda ash, water puryfying, precipitation non-ferrous metal ores, and the sugar industry.

Despite this growing demand, the capacity of limestone mining volumes decreased in 2012 compared to 2011. The volume increased again in 2013 and 2014, but the increase was not significant. If we measure the performance of the business through growth (Vanderstraeten and Matthyssens, 2010), this condition indicated a less optimal business performance of limestone mining industry.

One of the potential causes for this lacklustre performance of the limestone mining industry is the lack of innovation and innovation management. Currently, limestone mining firms in Indonesia are known for low levels of innovation management in their processing systems, modern technological equipment and customer service systems. As in the words of Tidd and Bessant (2009, p.3) "Innovation is driven by the ability to see connections, to spot opportunities and to take advantage of them", this lack of innovation may be partially driven by a less than optimal execution of partnerships with relevant partners. Cravens (2013) described the partnership as an effort to cooperate with stakeholders, where strategic alliances are used by many companies that compete worldwide. Partnerships may include the vertical relationships with suppliers and customers, as well as horizontal relationships consisting of lateral and internal partnerships. Meanwhile, employers in the limestone mining industry in East Java still have limitations in partnerships with their customers and suppliers associated to the production process, as well with lateral actors such as government agencies, banks, and others.

Based on the above reasoning, this study aims to investigate the impact of partnership and innovationmanagement to business performance of limestone mining company in East Java.

B. Literature Review

As this study is concerned with the impact of partnership and innovation management to business performance, it is important to review prior work regarding our key variables in the business literature.

Various measures have been used as proxies to business performance in different studies. Bonca and Tajnikar (2010) measure business performance based on performance indicator standard in ratio (such as ROA and ROE), or indicators in absolute value (such as cost and revenue). Conversely, Matic (2012) developed a model of business performance measurement covering financial and non financial performance.

Prior literature on innovation and innovation management has documented a body of work supporting the positive impact of innovation management to firm performance. Hilman and Kaliappen (2014) found that innovation affects performance. Then, Diaz-Fernandez, Bornay-Barrachina, and Lopez-Cabrales (2015) show a positive and strong linkage between innovation and performance. Vlasceanu (2013, p. 780) suggests that innovation management responds to challenges of a dynamic environment through the ability of managers in selecting a creative workforce, encouraging creative behavior and fostering a climate that supports innovation and creativity. Tidd and Bessant (2009) suggest 4 dimensions (4P) of innovation management includesproduct innovation, process innovation, position innovation, and paradigm innovation. …

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