The Effect of Innovation Capability on Market Performance Mediated by External Collaboration on SMEs

The functions and roles of SMEs in Indonesia are quite numerous both economically, politically, socially, culturally, securely. Economic-social-political roles, for example, to increase people’s income, reduce unemployment, poverty, urbanization flows. This study aims determine the effect innovation capability on market performance mediated by external collaboration Batam SMEs. took a sample 257 respondents, who managers or owners SMEs, selected using non-probability sampling method with purposive technique. Data were analyzed structural equation modeling partial least square (SEM PLS) approach. results showed that has significant relationship was observed between performance, while indirect mediates performance. Suggestions City continue maximize capabilities collaborate various parties improve performance.
 Keywords: capability, collaboration, MSMEs