PROFIL PENULIS

Nama : Dr. Joseph Philip Kambey MBAAlamat : Airmadidi, Minahasa UtaraPekerjaan : DosenAlamat pekerjaan : Fakultas Ekonomi Universitas Negeri ManadoTelp/HP : 0811436750

Nama : Nikolas F. Wuryaningrat SE., M.Sc.Alamat : Walian I, TomohonPekerjaan : DosenAlamat Pekerjaan : Fakultas Ekonomi Universitas Negeri ManadoTelp/HP : 085299844243

EXAMINING LEADERSHIP AND KNOWLEDGE SHARING ROLE ON SMALL AND MEDIUM ENTERPRISES INNOVATION CAPABILITIES

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Joseph P. KambeyNikolas F. Wuryaningrat

Faculty of Economics, Manado State University (UNIMA)

Abstract:Firm inovation capability is depend on knowledge resources. Knowledge sharing is an

important part in knowledge management to optimize firm knowledge resources. However knowledge sharing can not happen automatically. Leadership factor is an important factor to encourage knowledge sharing.

The purpose of this study was to examine the role of transformational and transactional leadership of the owner SMEs to encourage knowledge sharing activity which in turn this activity could enhance innovation capability. The survey was conducted in the SME production sector in Province of Daerah Istimewa Yogyakarta. 176 samples were succeed to collect. Data were analyzed with Structural Equation Model based on variants which is PLS-SEM.

The result showed that only transformational leadership had a positive effect to encourage knowledge sharing. Then result showed that knowledge donating had the positive effect to enhanced innovation capability, surprisingly knowledge collecting found had a negative effect to innovation capability.

Keywords: Innovation capabilities, knowledge sharing, leadership style

INTRODUCTION

The capability of a firm to produce innovative commercial ends depends on the ability of

its firm to manage its knowledge resources (Darroch, 2005). Managing knowledge effectively in

the firm is a strategic approach to increase the benefit of its knowledge for gaining a firm’s

sustainability. To be precise, in managing knowledge,

Knowledge sharing activities as a part of knowledge management is crucial to make

effective use of the organizational resources (e.g. knowledge) (see Argote et al., 1999; Srivastava

et al., 2006). In many cases, the activities of knowledge sharing and/or transfer are not occurred

accidently. Szulanski (1996, 2000) emphasizes barriers in sharing or transferring knowledge is

mainly based on the characteristics of sender dan receiver of knowledge. To overcome the

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barriers, the role of leader (i.e. leadership) in the organization is necessary to ensure that the

process of knowledge sharing/transfer goes in an effective way (Srivastava et al., 2006).

To make clearance to the idea, this research was conducted on the small-medium

enterprises (SMEs) with a number of reasons. The first reason, Management of SMEs usually

held by one person who acts as owner and manager (Stanworth and Curran, 1976; in Indarti

2010). It makes the owner or manager was major actor in the development of employees and

companies. Based on the opinion this study expected to examine a better leadership role than

larger companies. In addition there is lack of research linking the relationship between

transformational and transactional leadership in the knowledge management literature

(Crawford, 2005).

The presence of this study, replicated previous research conducted by Wuryaningrat et

al., 2012. the different of this research based on that we link the the role of transformational and

transactional leadership on knowledge sharing and innovation capabilities on emerging region

(e.g. North Sulawesi). Wuryaningrat (2012) research on the region which SMEs development

much better than North Sulawesi.

LITERATURE REVIEW AND HYPOTHESIS DEVELOPMENT

Knowledge Sharing

Knowledge sharing according to Dalkir (2005) called as a social activity. This activity

needs attitude, behavior, and motivation to encourage knowledge sharing creation (Xue et al.,

2011; Liao et al., 2007). Without knowledge sharing the development of knowledge will

underutilized (Srivastava et al., 2006).

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Knowledge sharing can be defined as tacit or explicit knowledge exchange process to

make new knowledge possible (Hoof dan Ridder, 2004). Knowledge sharing includes activity to

give idea, suggestion, information, experience and skill to other team member (Hoof dan Rider,

2004; Bartol dan Srivastava, 2002; Davenport dan Prusak, 1998). According to Hoof dan Rider

(2004) knowledge sharing divided in two distinc dimention which is knowledge collecting and

donating. Knowledge donating is process to carry or give knowledge through communication

between individual or group people. Knowledge collecting can be defined as process to have

knowledge from other person through consultation or persuation to make other person wiling to

share his knowledge.

Knowledge sharing is the key of success to translate individual learning to organizational

capability (Frey and Oberholzer-Gee, 1997; Nahapiet dan Ghoshal, 1998; in Lam and

Lambermont-Ford, 2008). But then Lam and Lambermont-Ford (2008) remind knowledge

sharing is not a thing easy to be done because it depends on individual willingness to share. This

problem according to Szulanski (1996, 2000) called by stickiness of knowledge. Therefore

knowledge sharing needs other factor. One of factor is leader with his leadership (Srivastava et

al., 2006).

Innovation as Newness

Definition of innovation is multiple diverse but refer to one conclusion which is

innovation as newness. According to Johannessen et al. (2001) innovation is a newness to

creating and to maintain sustainable compititiveness.

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Innovation not only physically application but also innovation process. According to

Samson (1991, in Harrison dan Samson, 2002) innovation as newness classified in three type

which is: innovation product, innovation process and innovation managerial and system.

Newness in this contex, decipherable as what consider new by one company maybe is not

consider new by other company (Johannessen et al., 2001; Tidd et al., 2005). Inovation as

newness is a changes that can be seen as innovation degree. Based on innovation degree March

(1991) classified innovation in two type which is: exploitative inovation and exploration

innovation. Tidd et al. (2005) also reveal degree of newness classified into incremental

innovation and radical innovation.

Sometimes the changes can easily accepted but sometime the changes feel so radical and

can make fundamental change to organization (Tidd et al., 2005). For example when small firm

used technology information for production process that changes become very new thing to

company, on the other side the use technology information is may not consider new for large

scale company.

Innovation need used knowledge and new knowledge from many source. Consumen,

supplier, university and research institution is source of knowledge for organization (Indarti,

2010). Sveiby (2001) reveal that new knowledge obtainable from internal and external source.

New knowledge can provide positive impact to innovation capability and firm performance

(Tsai, 2001).

SMEs has many problem to dealing with like less capital, low level human resource and

low interest from goverment, but SMEs have potency to develop their innovation capability

through their knowledge. SME with small number employee and simple organization structure

and not too involve with government birocracy is their advantage to absorb and share their

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knowledge. That’s advantage can make positive impact to increase SMEs innovation capability

(Ayyagari, 2006; Pelham, 2000).

Transformational and Transactional Leadership on Knowledge Sharing

Leadership transformational and transactional leadership even is distinct is not come

from two different person. In other word is not mutually exclusive and have continuum

characteristic (Bass, 1985; dalam Yukl, 2006) and coreboroting the relationship serta saling

menguatkan hubungan (Hater dan Bass, 1988 in Den Hartog 1997).

The relationship between transformational and transactional leadership in knowledge

sharing explainable as social activity which need high attitude and behavior and high motivation

from all organization member (Xue et al., 2010,; Liao et al., 2007). That opinion supported by

Deluga (1990). Deluga (1990) said transformational and transactional leadership styles effective

change employee behavior.

Bass (1985, 1990 in Yukl, 2006) transformational leadership is leaders’ way to motivate

subordinate or employee to have performance beyond expection. Bass (1985, 1990; in Yukl, 2006)

classified four dimention of transformational leadership which is individual motivation, individual

inspiration, individual consideration and intellectual stimulus.

Transformational leader tried to obtain his influence and power with individual approach

to inspire his employee (Yukl, 2006). In that way the relationship between supervisor and

subordinate can change into emotional relationship. That emotional relationship can build trust

between them. According to Davenport and Prusak (1998) trust is an important factor for person

to share knowledge.

Through emotional relationship hopely employee willing to open itself and follow leader

want to active in knowledge collecting and knowledge donating. For example emotional

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relationship can describe the same as familihood, brotherhood or friendship. In other word

transformational leader expected to build supervisor-subordinate relationship as familhood

(Deluga, 1990).

Strong emotional relationship between supervisor and subordinate may help the owner of

SMEs to asking employee involvement to developed company with knowledge development.

Through emotional relationship the owner or manager of SMEs hope employee willing to share

his knowledge even without asking before. From the statement above can conclude the owner

or manager of SMEs who have transformational leadership may have the ability to change

employee attitude and behavior to open his knowledge and together create firm knowledge

sharing activity. This opinion supported by Bryant (2003) dan Crawford (2005) which gave

empirical evidence that transformational leadership positive influenced knowledge management

which includes knowledge sharing. From the opinion above and previous research can hyphothes

as follows:

H1a : Leadership transformational positively influences to knowledge collecting

H1b : Leadership transformational positively influences to knowledge donating

Different from transformational leadership, transactional leadership made relationship

supervisor-subordinate as work agreement not emotional relationship. When leader made a

appearance his transactional leadership, leader can consider employee knowledge as firm

properties. Petigrew and Mechanic (1972, 1962 in Deluga 1990) reveal information and skill can

be negotiation tool to reach working agreement.

Bass (1985, in Yukl, 2006) define transactional leadership as transaction process between

supervisor and subordinate. Based on Deluga (1990) transactional leadership considers the

supervisor and his subordinate as implicit or explicit working agreement. Explained by Deluga

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(1990) when employees follow the working agreement the employee had the reward or incentive

right but when employee deviate from the agreement employee will receive punishment.

Bass (1985, 1990 in Yukl, 2006) transactional leadership style classified as two

dimention which is contingent reward and management exception. Contingent rewards involve

additional reward to increase employee motivation. Other wise management exception can

explain as corrective or evalution approach from leader to evaluate employee performance.

According to Bock dan Kim (2002) knowledge sharing can describe as economic

exchange theory. This opinion decipherable that knowledge sharing depends on cost and benefit

who made by employee. According Bartol and Srivastava (2002) good extrinsic reward system

like salary increasing, bonus and incentive can encourage knowledge sharing. In other word

Bartol and Srivastava (2002) explained reward as stimulus for employee to develop knowledge

through knowledge sharing.

When opinion above connected with transactional leadership than transactional leader

can extend his influence and power through instrumental compliance (see Yukl, 2006). For

example leader can extend his power and influence with salary raise, promotion and also that

punishment based on employee mistake (Yukl, 2006). Bock dan Kim (2002) said reward and

punishment is regular firm approach to encourage knowledge sharing. Those opinions can

ilustarated as the relationship between teacher and student. When teacher gave homework

student will do the homework for two reasons, first to have a good score and second to avoid

teacher punishment.

Based on opinion and example above hopely while employee believe that employee will

have extra benefit, promotion opportunity and opportunity to development or to avoid

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management punishment than management want will be fulfill (Yukl, 2006; Bass et al., 2003)

including knowledge sharing activity. From the opinion above can be hyphothes as follows:

H2a : Transactional leadership positively influences to knowledge collecting.

H2b : Transactional leadership positively influences to knowledge donating.

Knowledge Collecting and Donating

According to Van den Hoof dan Ridder (2004) when leader can persuade its follower to

collect knowledge than leader can crate willingness to donate knowledan. In research context

those opinion dechiphrable the owner or SMEs manager can feel the success of persuade or

allurement to the employee to donate knowledge.

Those opinions indicate the benefit of knowledge sharing can providable from intensive

communication between supervisor and subordinate. That intensive commnuication intended to

persuade employee and even other people who involve in organization to engange in knowledge

donating.

H3 : With knowledge collecting the owner of SME feel the employee will more willing to

donating knowledge.

Knowledge Sharing and Innovation Capabilities.

Innovation closely linked with Nonaka and Takeuchi (1995) concept which is knowledge

creation. Firm ability to manage knowledge resources can be used for faster firm problem

solution. Many previous studies gave empirical evidence that knowledge sharing can enchance

innovation capability (Like Lin, 2007; Liao et al., 2006; Darroch, 2005; Srivastava et al., 2006;

Tsai, 2001,).

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H4a (+)

H3 (+)

H4b (+)

H1a (+)

H2b (+)

H1b (+)

H2a ()

Firm innovation capability which born from knowledge sharing activity can be measure

with more creative idea can be created. These new ideas facilitate innovation activity and new

business opportunity (Darroch, 2005). As mentioned before the purpose of knowledge is to

create new knowledge from internal and external source. Thereby to accomplish knowledge

sharing purpose small firm or larger firm should more related with knowledge sources like

consumen and supplier or other sources. From the opinion above can hyphoteses as follows:

H4a : Knowledge donating positively influences innovation capability.

H4b : Knowledge collecting positively influences innovation capability

RESEARCH MODEL

Research hypotheses as describe before will be basis for create research model. These

research model consist of five variables. Leadership style and knowledge sharing form of

exogeneous variables whereas innovation capability form of endogeneous variables. Research

model can be seen on figure 1.

Figure 1. Research Model

ri

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Knowledge donatingTransformational Leader

Innovation Capability

Knowledge collectingTransactional leader

Leadership Knowledge sharingInnovation Capability

RESEARCH METHOD

200 total quessioner directly distributed to respondent. Data succed to return was 188 but

only 176 data can analysis because can’t fulfill simple criteria or missing data. Cross sectional

survey was conduct at Province of North Sulawesi SMEs production sector. Sample was choseed

according three criteria which is: SMEs from production sector, SME production sector who was

minimum three years operazionlized and SMEs who have 5-99 numbers of employees.

The owner or manager SMEs is the major actor to take duty and responsibilities to

developed SMEs and firm innovation (Stanworth dan Curran, 1976; dalam Indarti, 2010). Hence,

the owner or manager SMEs can provide information which needed.

The research conducted at Province of North Sulawesi. Responden profile can be seen

from table 1.

Table 1. Responden and Business Profile

Dimention Categori N

Sex : a. Manb. Woman

10076

Ages

a. <25 tahunb. 26–30 tahunc. 31-35 tahund. 36-40 tahune. > 40 tahun

518169542

Education Level

a. SDb. SMPc. SMUd. Diplomae. S1f. Lainnya (S2)

1737708431

Type of business

a. Handycraft and Generalb.Chemical and materialsc. Metal and electricd. Foode. Clothing and leather

520346030

Location a. Village 96

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b. Townc. Fringe area

6614

Mean Number of employee a. Full timeb. Part time

1113

Amount of Asset (2 tahun terakhir)

a. less than 5 milionb. 5 juta s/d 50 jutac. >50 s/d 100 jutad. >100 s/d 150 jutae. >150 juta

598913510

turnover per month

a. <50 jutab. >50 s/d 100 jutac. >100 s/d 150 jutad. >150 juta

108372110

Source: Data Primer diolah (2011)

Based from table 1 mostly of respondent are men with age 36-40 years old. The majority

education level the owner or managers of SMEs are high school and university level are mostly

appeared. Respondent had average 15 years experience in business. For about 34.09% of

respondent business are foods with most of their business located in village. The number of

employees in this sample varied, but the average full time employees are 11 people, with the

number of average part time employee are 13 people. From the data we can found that all of

business can classified as small business (Classification of BPS). Respondent of SMEs

production sector largely has assets in the range 5-50 million rupiah. While the monthly turnover

of the samples are mostly below 50 million rupiah.

This research instrument was adopted from previous research. All of research construct

measured with five point likert scale (1=almost never to 5=almost always). Transformational and

transactional leadership measured with MLQ-1995 (Bass, 1995). Knowledge sharing which

include knowledge collecting and donating dimention measured with Hoof and Ridder (2004)

instrument. Innovation capabilities measured with Johannessen (2001) instrument.

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RESEARCH RESULT AND DISCUSSION

There are two major steps following this study before testing. First testing construct

validity (convergent validity and discriminant validity) and testing hypothesis. Two major step

was analyzed with Structural Equation Model (SEM) based variant or partially least square

(PLS) with computer program SmartPLS 2.0.

From validity result found that 24 item was valid from 48 total items. 24 items was drop

because factor loading score can’t reach minimum valid score 0.5 or had cross loading (Hair et

al., 2010). Convergent validity testing done to determine the correlation between the research

construct. Indicators used in convergent validity are factor loading value which accumulated in

its construct and AVE values (Hair et al., 2010). Reliability also included analyzing convergent

validity because according to Hair et al. (2010) reliability is one of convergent validity indicator.

Reliability measurement suitable for PLS-SEM is composite reliability (Hair et al. 2011). The

result of the testing can be seen in table 2.

Table 2. Convergent Validity and Reliability

Variable Number of item

Convergent validity Composite reliabilityLoading

factor AVE

Transformational leader (TRF)Transactional leader (TRX)

92

0,637-0,8110,775-0,897

0,5670,688

0,8860,814

Knowledge donating (KD) 5 0,632-0,758 0,575 0,818Knowledge collecting (KC) 4 0,769-0,812 0,630 0,871Innovation capabilities (INOV) 4 0,646-0,819 0,587 0,849

Sumber: Data primer diolah (2011)

Table 2 show all research variable posses factor loading and AVE value bigger than 0,5

(Hair et al., 2010). Composite reliability score all variable as shown at table 2 bigger than 0.7. it

means composite reliablity all construct show a ideally value (Hair et al., 2011).

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After conduct convergent validity than this study analyzed discriminant validity to

compare the distinct between construct. Discriminant validity measure with comparison between

AVE square root and corelation laten variable (Chin, 1995 in Jogiyanto dan Abdillah, 2009).

Discriminant validity result can be seen at table 3.

Table 3. Discriminant Validity

VARIABEL AKAR AVE INOV KC KD TRF TRXINOV 0,767 1        

KC 0,794 -0,081 1      KD 0,690 0,117 0,556 1    

TRF 0,684 0,03 0,4190,43

2 1  

TRX 0,829 0,081 0,2590,28

7 0,629 1 Sumber: Data primer diolah (2011)

Ket: INOV: innovation capabilities, KC: knowledge collecting, KD: knowledge donating,

TRF: transformational leadership, TRX: transactional leadership.

Table 3. show all research contruct posses discriminat validity because AVE square root

score bigger than corelation laten variable. It mean every construct distinct than other construct.

Before testing hypothesis this study also conduct R-square (R²) score as can seen at table 4.

Table 4. Model Prediction

Variabel Nilai R SquareInnovation capabilities (INOV)Knowledge collecting (KC)Knowledge donating (KD)

0,0460,1750,358

Sumber: Data primer diolah (2011)

At table 5 can be seen that inovation capabilities of SME production sector at Province

of North Sulawesi response by knowledge donating and collecting only 4,6% whereas others

explain by other variable or factor. It mean even knowledge sharing important to increase

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innovation capabilites, but at SMEs at Province of North Sulawesi it’s may not main concern yet.

Whole variable knowledge sharing (KC+KD) influenced by leadership style the owner of SME

by 53.3% others explain by other factor. It means leadership styles are important factor to

influencing knowledge sharing.

Critical ratio (CR) 1.960 two tailed score used to seen hypothesis significant or not (for

level of confidence 95%). If CR score above 1,960 two tailed and it’s positive than can conclude

hypothesis supported and otherwise. The result can be seen at table 6.

Table 6. Hypothesis esting

Hipotesis Hubungan Koefisien S.E C.R KeteranganH1aH1bH2aH2bH3H4aH4b

TRF KCTRF KDTRX KCTRX KDKC KD

KD INOVKC INOV

0,4230,223-0,0060,0280,4550,238-0,217

0,0850,0780,0980,0880,0580,1130,116

4,9412,8620,0660,3217,7412,1041,766

SupportedSupported

UnsupportedUnsupported

SupportedSupported

Unsupported Ket : * sig. Pada 5%

TRF:kepemimpinan transformasional TRX: kepemimpinan transaksional, KC:mengumpulkan pengetahuan, KD:mendonasikan pengetahuanSumber: Data primer diolah (2011)

According to table above this study conclude that hypothesis one (1a dan 1b) accepted.

Whereas hypothesis two (2a and 2b) not accepted. Than hypothesis three accepted. Last

hypothesis four (4a) accepted but hypothesis 4b couldn’t accepted because there is no significant

negative influence knowledge collecting on inovation capabilities.

DISCUSSION

The research result showed that transformational leadership made positive influence to

encourage knowledge sharing. These result same as previous study. Bass (2003), and Yukl

(2006) reveal that transformational leadership more effective than transactional leadership.

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According to Gorelick et al. (2004) leader who had charismatic, strong vision, powerfull, role

model or simbolic, passion and had strong faith is a good leader to develop and manage

organization knowledge resources. That characteristics were suitable with transformational

leadership.

The result also confirmed Bryant (2003) study. Bryant (2003) revealed that

transformational leadership have positive effect to influence knowledge sharing activity. Not

only that the result also confirmed that leadership especially transformational leadership can

influencing organization life and human from every aspect and organization behavior (Tepper

2000; Northouse, 1997).

Leadership transformational is a form of emotional relationship between supervisor and

subordinate (Deluga, 1990). Hence the connection between the owner of SME and the

employees may build from emotional relationship. Emotional relationships could be good for

willingness to open employee attitude and behavior to share knowledge (see Xue et al., 2011).

Other wise transactional leadership could not made real impact to knowledge sharing.

Predominantly SMEs production sector at Province of North Sulawesi located at village and they

hired most their employee from their village too (see table 1.). That found made posible to build

emotional relationship between employee and their boss. Research found made posible to form a

strong emotional bond between employer and employee because usually familyhood and

friendshipties (silahturahmi) at rural areas is relative still strong. Hence reward and punishment

approach apparently not the right approach to applied in SMEs production sector at Province of

North Sulawesi.

Kohn (1993) reveal that there is corelation between reward and punishment. Kohn (1993)

said that reward hope made by management could be the other form of punishment, because it

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may difficult to distinguish itself for employee to realize being punish or not if they fail to obtain

working target. Kohn (1993) also reveal that reward could be damage the relationship that has

been built by creating unhealthy competition among employees. Hence transactional leadership

style that emphasizes reward and punishment could be disconnected the relationship between

superior and subordinate who also villager.

Hypothesis three was support it mean this study gave empirical evidence that proof the

owner or manager of SMEs can feel with knowledge collecting his employees willing to donate

knowledge. To have a new knowledge manager need to build intensive and understanding

communication between manager and subordinate and other individuals involved in

organization. Through this closeness can make employees or other individuals involved in

the organization to open itself and become more willing to share knowledge. This founding

accordance to Hoof dan Ridder (2004) that reveals knowledge collecting can encourage people

willingness to knowledge donating.

Next we discuss about hypothesis four (4a and 4b). The research founding gave empirical

evidence that knowledge donating make positive influence to SMEs innovation capabilities.

Vries et al. (2006) revealed that individuals who are willing to donate their knowledge are the

individuals who had desire to recognize by another person. This research indicated that the actor

of SMEs production sector could be had enough attitude, behavior and passion to open about

their knowledge. Which in turn from their attitude, behavior and passion indicated new

knowledge could be easier to transform on innovation capabilities. (Liao et al., 2007).

Surprising and unexpected result occur when research result showed knowledge

collecting gives a negative effect on the innovation capabilities (even there is no empirical

evidence). The reason based on the concept of innovation funnel (Clark dan Wheelright, 1992)

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that might explained these findings, The concept assume that the amount of knowledge,

information and ideas will make a person confused and difficult to determine where the relevant

knowledge to deliver as innovation. With knowledge collecting the owner/manager of SMEs

could collected knowledge from many source including their employees, supplier and consumen.

However the knowledge gained could cause its own difficulties. Form of these difficulties are

confusion or difficulty in choosing or absorp relevant knowledge that can be used to make

innovation.

SMEs are the business sector which has many shortage such as lack education level, lack

of capital and lack of technology used. That shortage probably be cause of knowledge were

created could not absorb well. Liao et al. (2007) said that lack of education level will cause lack

of knowledge absorptive capacity too. Beside that SMEs production sector usually work based

on order. This matter perhaps gave conseqences plan to innovate weakened because of many

diferent suggestion were made by consumen.

CONCLUSION

This study proved the transformational leadership style has a positive effect on

knowledge sharing activities. From the results of this study can be summarized in the SME

production sector at Province of North Sulawesi transformational leadership style plays an

important role as compared to transactional leadership in developing knowledge sharing

activities. Through transformational leadership style of SME owner or manager of the production

sector at Province of North Sulawesi were able to encourage the involvement of employees to

work together to make SMEs more innovative. Nurture, educate and guide, motivator and as a

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role model is characteristic of transformational leadership which can be used owners or

managers of SMEs to encourage attitudes and behaviors and motivation to share knowledge.

Based on this research can be concluded that knowledge-sharing activities require good

communication and intense. Fabric of this communication is intended to rate the closeness

between the owner and employees better. Through this closeness than originally expected are

covered individuals may be more open to knowledge. Knowledge sharing is an important

element in knowledge management (Srivastava, 2006). The results of this study provide

empirical evidence that the dimensions of knowledge sharing that is donating a positive effect on

the innovation capabilities, while the dimensions knowledge collecting gives a negative impact

on innovation capability. From these results it can be concluded that the activity donated an

important role in increasing innovation capability. While the gathering of knowledge can be used

as a booster to increase the knowledge donating activity

Negative influence the activity of collecting knowledge on the ability of innovation may

be caused by the difficulty of the SME to absorb knowledge. This is probably due to a lack of

qualified human resources factor, the less capital, and technology used are lacking. This is to

advise the various parties such as government to enhance its role to enhance the innovation

capabilities of SMEs.

This research has succeed to answer research goals. From the results of this study can be

known leadership owners or managers of SMEs play important role to encourage the creation of

knowledge-sharing activities. Then an outline of knowledge sharing activities can also generate

new knowledge that can be used by SMEs to increasing innovation capabilities.

Based on the results of this study are expected development of the SME business world,

may be a reflection of the owner or manager to further strengthen its leadership role. It is

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intended to make efforts to develop SMEs through the fabric of better cooperation with

employees and all elements of the business. From that cooperation are expected to share

knowledge can be maintained in order to keep popping up information, new ideas, new skills,

which in turn makes SMEs more innovative.

This study if compare to Wuryaningrat (2012) study; we can conclude there is no

different result between this study. The possible reason to explain why both research had same

result because of SMEs characteristic is general same, even there were different culture. The

other word, culture perhaps not the important issued based on research context.

LIMITATION AND SUGGESTION

Cross sectional survey method could justifable as a research limitation. Leadership is

changeable through time, next research can consider longitudinal survey research method.

This research use subjective perspective from the owner of SME which could make

potencial bias. Objectivity can consider in next research. For example to measure innovation

based by patent can consider.

Next research can consider to include absorbtive capacity, personality, and person

organization fit to find a better understanding about how innovation can be increase through

knowledge sharing. That variables can be justified as moderating variables or mediating

variables.

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