Innovation and Partnership Strategy for Rural Banks’ Performance in Indonesia

Abstract

The banking sector has a rapid transformation due to the rapid development of technology which has created increasing competition. Rural Banks must immediately accelerate change in order to survive the competition of commercial banks and also the emergence of financial technology. The purpose of this research is to encourage BPR performance improvements in situations of competition, technological developments, and stricter Rural Banks’ regulations compared to commercial banks so that Rural Banks need to make breakthroughs through innovation and partnership strategies that will be studied, and this is the urgency of the goal this research. Using a sample of 72 Rural Banks in West Java Province in Indonesia using Structural Equation Modeling by selecting the dimensions of Technology-Based Product Strategy, Technology-Based Service Strategy, and Technology-Based Network Strategy which represent Innovation Strategy. Meanwhile, the partnership strategy is represented by the Marketing Partnership Strategy, Financial Partnership Strategy, Distribution Partnership Strategy, Supply Chain Partnership Strategy, and Social Structure. The results of the study show that the Innovation Strategy has an effect on Rural Banks’ performance with the Technology-Based Product Strategy as the most important variable because it has the greatest influence. Likewise, the Partnership Strategy has the greatest influence on business performance, with the Marketing Partnership Strategy having the greatest influence on Rural Banks’ performance. In the end, how successfully a new product is launched is the most attractive way to attract customers to drive better Rural Banks’ performance.