Author(s): Arif Singapurowoko,Arif Hartono
This study examines innovation activities of Indonesian small family firms that comprise of three interconnected stages i.e. knowledge sourcing, knowledge transformation, and knowledge exploitation that is termed as innovation value chain (IVC). Currently, IVC study on Indonesian family firms remain unexplored. Samples of the study are small family firms that operating their businesses in Yogyakarta province, Indonesia. Each IVC stage employs different statistical analysis methods. Probit regression, logistic regression, and OLS regression are employed in the first, second and third stage of the IVC, respectively. The study finds the existence of a complementary relationship among external sources of knowledge in the first link of the IVC. In the second link of the IVC, external knowledge from market (i.e. suppliers, customers, and competitors) and open sources (firms’ association) positively influence innovation. In the last link of the IVC, positive associations were found between nontechnological innovation (i.e. organizational and marketing innovation) and productivity