Human Capital on Business Performance on Distro and Boutique

SME in Medan City

Yeni Absah

, Yasmin Chairunisa Muchtar

and Inneke Qamariah

Universitas Sumatera Utara

Keywords: Human Capital, Business Performance, Entrepreneur.

Abstract: SME business owners in general still tend to utilize conventional based in implementing their business.

Thus, in generating products the applied technology is still low. If entrepreneurs are following the latest

development, which focused on maximizing the management of intellectual capital, then the existing

entrepreneurs in Indonesia will be able to compete by utilizing the competitive advantage gained through

innovation and creativity generated by the intellectual capital owned by the entrepreneurs. Distro

(distribution store) is a type of store in Indonesia that sells clothes and accessories which are entrusted by

the clothing manufacturer or self-produced. Boutique is the result of personal production of the owner and

the purchase of clothes from the manufacturer/clothing distributor from clothing company. The aim of this

research is to analyze the effect of human capital on business performance on distro and boutique SME in

Medan City. The result shows that human capital has a positive and significant effect on the business

performance of Distro and Boutique in Medan. Furthermore, human capital contributed 78.9% to explain

Business performance. Meanwhile, the remaining 21.1% is explained by other variables.

1 INTRODUCTION

SME business owners in general still tend to utilize

conventional based in implementing their business.

Thus, in generating products the applied technology

is still low. Abidin (2000) stated if entrepreneurs are

following the latest development, which focused on

maximizing the management of intellectual capital,

then the existing entrepreneurs in Indonesia will be

able to compete by utilizing the competitive

advantage gained through innovation and creativity

generated by the intellectual capital owned by the

entrepreneurs.

Distro (distribution store) is a type of store in

Indonesia that sells clothes and accessories which

are entrusted by the clothing manufacturer or self-

produced (https://id.wikipedia.org). The word

boutique comes from French, which in its original

language means small stores to seek popularity.

Boutique provides a variety of high quality products,

such as clothes, accessories, and jewelry. Boutique

is the result of personal production of the owner and

the purchase of clothes from the

manufacturer/clothing distributor from clothing

company.

The phenomenon of high public demand for

fashion becomes an opportunity for the creative

industry community to develop their business in the

clothing industry, one of which is distro and

boutique. Distro and boutique as creative industries

become a place for the people to choose the concept

of clothing they want.

The increasing number of distro and boutique is

due to the large number of university students who

are interested in clothing products sold in distro and

boutique. Therefore, almost all distro and boutique

are located near campus, due to the market segment

of distro and boutique is university students, such as

in USU there are 22 distros as well as boutiques in

Jalan Gedung Arca, and there are 50 distros and

boutiques in Jalan Halat.

Intellectual capital has several elements, such as

human capital, technological capital, and customer

capital which help the entrepreneurs in improving

their business performance (Khalique, et al, 2013).

From pre-survey, it is obtained the majority of

distro and boutique sells similar products and only a

few sells different products, many products sold in

distro and boutique are result of plagiarism or fake,

moreover the stock renewal of the products is

classified as slow.

1570

Absah, Y., Muchtar, Y. and Qamariah, I.

Human Capital on Business Performance on Distro and Boutique SME in Medan City.

DOI: 10.5220/0010089215701573

In Proceedings of the International Conference of Science, Technology, Engineering, Environmental and Ramiﬁcation Researches (ICOSTEERR 2018) - Research in Industry 4.0, pages

1570-1573

ISBN: 978-989-758-449-7

2 LITERATURE REVIEW

2.1 Human Capital

The definition of human capital is a combination of

knowledge, skill, and the ability to innovate in

completing tasks including the company value,

culture, and philosophy (Bontis, et al 2000).

Human capital plays an important role in a

company. For that reason, for the company to be

able to own human capital means the company must

be able to generate a sense of ownership among the

employees and the company itself.

According to Stokey (2003) the need for human

capital these days is based on:

1. An intense competition of financial and

nonfinancial profit.

2. Business and politic leaders begin to recognize

that having people with skill and high motivation

can make a significant difference in

performance.

3. Rapid changes marked by new process and

technology will not sustain if the competitor is

able to adopt the same technology. However, to

implement a change, the labor owned by the

industry must possess a good skill and ability.

4. To grow and adapt, the leadership of an

organization must recognize the value and

contribution of people.

There are 3 dimension of human capital according

Bontis (2000):

1. Competency

2. Attitude

3. Intelligence

2.2 Business Performance

There are ten different types of performance

measurements identified by Business Performance

and it narrowed down to three main dimensions of

financial performance, business performance and

organizational effectiveness (Laosirihongtong and

Boon-Itt, 2007).

The definition of performance (Moeheriono,

2012:32) is a quantitative and qualitative measure

that describes the achievement level of a goal set by

the organization. Man et.al., (2002) stated

performance is a main indicator to see the success

and this is proven factually and theoretically. In

other words, performance in an organization is an

answer to whether the set goal of an organization is

a success or not.

According to Purnomo dan Lestari (2010) there

are two dimensions of business performance,

namely:

a. Quantitative

Quantitative is a measure based on empirical

data and the number result which characterize

performance in physical or other form.

Quantitative dimension explains:

1. Sales growth

2. Revenue growth

3. Customer growth

4. Profit growth

The growth of customer or other sector in the

business is included in the quantitative

dimension. The indicator to see the performance

of the company can be seen from the increasing

market share, finance, production, and the

number of employees (Ratno and Sri, 2010).

b. Qualitative

Qualitative is a measure based on a person’s

perception according to observation and

assessment of something.

The measurement of qualitative performance,

include:

1. Labor’s discipline

2. Individual behavior

3. Business image

Qualitative dimension becomes important

due to the focus on the people itself as activity

actors will be stronger (Ratno and Sari 2010).

2.3 Human Capital on Business

Performance

Theoretically and empirically, human capital has

been linked to business performance. Since a couple

decades ago many comparative studies on the

relationship of human capital and performance

exhibited that certain aspects of human capital are

beneficial to business performance (Bontis, 2007).

The intricacy of business organization

environments insists on employees who are

proactive, positive and having sufficient quality of

human capital (Samad, 2012).

Human capital is connected to individuals’

knowledge and abilities that grant changes in action

and economic growth. Individuals’ knowledge and

abilities can be secured from numerous approaches

(Coleman, 1988).

According to (Samad, 2012), in order to acquire

competitive advantage and business performance,

depends on the characteristics of human capital that

have potential to develop the capabilities internally

and the cost of acquiring them in the market.

Human Capital on Business Performance on Distro and Boutique SME in Medan City

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The significant role of human capital on firm’s

competitiveness and performance is connected by

Human Capital (Agarwala, 2003).

It has been found that Human Capital is

associated to high quality of employee, productivity,

longevity of companies, greater tendency to business

and economic growth (Goetz and Hu, 1966).

3 METHOD AND RESULT

The research type is causal associative (causality).

The population in this research is 22 Distro and

Boutique within the area of USU, moreover within

the area of ITM is 54, resulting in total of 76 distro

and boutique within the area of USU and ITM. In

this research, the sampling is conducted by utilizing

purposive sampling and accidental sampling with

saturated sampling. These sampling techniques are

utilized due to the number of population of 76 distro

and boutique within the area of USU and ITM.

This research utilized two types of data

resources, which are: (1) Distribution of

Questionnaires, and (2) Documentations Studies.

Simple linear regression analysis is used as data

analysis technique to find out the influence of the

independent variables, which is Human Capital to

the dependent variable which is Business

performance (Y). Also, this research used

descriptive statistical analysis method and depth

interview as data analysis techniques.

Table 1: The Result of Simple Linear Regression

Analysis.

Coefficients

Model

Unstandardize

d Coefficients

Standardized

Coefficients

t Sig.

Std.

Erro

Beta

(Constant

)

4,960 2,358

2,103 ,039

Human

ital

,667 ,060 ,789 11,03

,000

a. Dependent Variable: smeperformance

Source: Processed Data (2018)

It is found the Simple Regression Analysis

Model is:

Y = 4,960 + 0,667HC + e (1)

The predictor variable, partially Human Capital (Sig.

= 0.000 < 0.05) < 0.05) is significantly affecting

business performance.

Table 2: Model Summary.

Model Summar

Model R R Square

Adjusted R

Square

Std. Error

of the

Estimate

1 ,789

,622 ,617 1,851

a. Predictors: (Constant), humancapital

Source: Processed Data (2018)

The coefficient determination of this research is

0.789, which means that Human Capital contributed

78.9% to explain Business Performance. While the

remaining 21.1% is explained by other variables.

4 DISCUSSION

Partially, human capital is positively and

significantly affecting business performance on

distro and boutique SME in Medan City. Human

capital is an essential factor to a business especially

SME in improving the business performance of

distro and boutique. Distro and boutique is one of

creative industry in the field of fashion that need

knowledge, ability, and skill. The most important

aspect of human capital in improving business

performance is competency and creativity (Samad,

2013).

The knowledge of product, design and

marketing, the ability to manage the business as well

as the skill in utilizing the technology is playing a

part in improving the business performance.

Furthermore, continuous improvement of employees

in terms of knowledge, skills and abilities is

important for business input and performance

(Samad, 2010).

Distro and boutique SME in Medan City is

playing a role in the ability possessed by the

employees especially knowledge, skill and ability as

a collective ability of the business, therefore SME is

able to improve the performance hence increasing

ICOSTEERR 2018 - International Conference of Science, Technology, Engineering, Environmental and Ramiﬁcation Researches

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the revenue. Other than that, by owning human

capital SME is able to compete within the industry

and give response to the business activity in facing

the competitor.

A notable contribution of human capital in any

industries including logistic companies has been

accentuated extensively in literature. A number of

studies on motivational aspects, knowledge, skills

and competencies required for logistician disclosed

their impression on business performance (Cahoon

and Tran, 2011).

5 CONCLUSIONS

Human capital is positively and significantly

affecting business performance on distro and

boutique SME in Medan City. Furthermore, the

value of r square is 78.9% to explain business

performance. While the remaining 21.1% is

explained by other variables.

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