Impact of Distribution Channel Innovation on the Performance of Small and Medium Enterprises

Impact of innovation in distribution channel functions on firm performance, particularly among export-oriented, agro-based small and medium enterprises (SMEs) is under researched. Based on this literature gap, the present study examines the impact of distribution channel innovation on SMEs performance in Indonesia. A total of 120 samples were collected from export-oriented, agro based manufacturing SMEs in Yogyakarta and the surrounding areas, Java. Using a regression analysis, the findings show that innovation in assortment, information sharing and transportation coordination had positive and significant relationships with firm performance. This study also found that distribution channel effectiveness mediated the relationship between innovation in assortment and transportation coordination and firm performance. All this finding is crucial for firms, who intend to remain competitive in the global market. Future studies, however, should consider many other factors that may influence firm performance in the agro-based industry. Key words: Distribution channel; Innovation; Effecti veness; Performance; SMEs; Indonesia