COMPETITIVE ADVANTAGE TO MEDIATE THE INFLUENCE OF PRODUCT INNOVATION AND ENTREPRENEURIAL ORIENTATION ON MARKETING PERFORMANCE IN SMALL AND MEDIUM INDUSTRY

This study aims to analyze the effect of product innovation, entrepreneurial orientation, and competitive advantage on marketing performance; test the effect of product innovation and entrepreneurial orientation towards marketing performance through competitive advantage as a mediation variable. The sample in this study was 69 owners of small and medium industries bakery in Ponorogo Residence who had made innovations on their products. The sampling technique in this study uses total sampling. Data analysis techniques used the approach Partial Least Squares (PLS). The results found that product innovation has a direct positive effect on marketing performance, entrepreneurial orientation has a direct positive effect on marketing performance, product innovation has a direct positive effect on competitive advantage, entrepreneurial orientation has a direct positive effect on competitive advantage, competitive advantage has a direct positive effect on marketing performance, product innovation has a positive effect on marketing performance through competitive advantage, and entrepreneurial orientation has a positive effect on marketing performance through competitive advantage. Competitive advantage acts as a partial mediating variable.

and until 2020 the potential target of the bread and cake business is worth Rp 20.5 trillion. The bread industry players in Indonesia are 60% traditional and 20% are large producers. In comparison, the remaining 12% are artisan bread producers, one of which is Holland Bakery which has special outlets and receives specific orders.
The tight competition of SMIs in practice still facing various obstacles, such as the low quality of human resources of the SMIs and lack of knowledge and entrepreneurial competence that resulted in low business productivity, insufficient product innovation, lacking in technology, management, information, and market, and lack of government support to SMEs in Indonesia. With the problems faced by SMIs, companies that want to maintain their existence in the level of competition are expected to unleash all their potential and strength to compete. Business competition is very tight, requiring companies to improve marketing performance further because a product's success boils down to marketing performance. Marketing performance is a factor commonly used to measure success for a company's strategy. The company's strategy is always directed to produce good marketing performance, such as sales turnover, sales growth, and market share (Ferdinand, 2000). Sales turnover can be interpreted as the number of sales of the company's products. Sales growth is more like the number of sales that increased from the previous period and market share is more like the vast marketing area of the product. Munizu (2010), in his research explained, performance is influenced by two main factors, namely internal factors, and external factors. Internal factors consist of human resources, financial aspects, operational, technical aspects, and marketing aspects. In contrast, external factors consist of aspects of government policy, socio-cultural aspects, and economic aspects. Product innovation and entrepreneurial orientation are contained in internal factors that can affect performance.
Product innovation is a product development activity related to performance. It is an important thing to consider in increasing productivity and global competition (Ellitan, 2006). Through product in-novation, it can be expected to meet market demand. It can be used to improve marketing performance, and this requires the company's intelligence in recognizing the tastes of its customers so that the innovation it does ultimately is following the wishes of its customers. Thus innovation must be planned and carried out carefully (Wahyono, 2002).
Product innovation will be one of the competitive advantages to be gained by a company. Innovation is very important to be applied to bread SMIs products to increase competitiveness in trade and attract consumers so that competitiveness can be used to improve marketing performance. Without innovation, SMI products will only become commodity goods and subsequently be trapped in a price war. However, product innovation without being based on market needs will increase the risk of product failure.
In addition to product innovation, entrepreneurial orientation also influences marketing performance improvement. Jaworski and Kohli (1993) in Haji et al. (2017) explain entrepreneurial orientation is a corporate culture that can lead to increased marketing performance. Entrepreneurial orientation is a very important factor for the success of a company. When SMIs can apply entrepreneurial orientation, they can develop business strategies to be used as a tool to face competition. SMI owners have a crucial role in developing innovative products, increasing the company's brand equity, and creating high marketing performance. The SMI owners who are proactive, innovative, and willing to take risks will have a stronger entrepreneurial orientation.
Entrepreneurial orientation is a driving factor for the development of Bread SMI. Drucker (1959), in Suryana (2013, states that the essence of entrepreneurship is the ability to create something new and different through creative thinking and innovative action to create an opportunity. Entrepreneurial orientation is formed through four dimensions, namely innovative, proactive, risk-taking, and aggressiveness in competition (Weerawardena and Coote, 2001). Research conducted by Platin and Ergun (2017) proves entrepreneurial orientation and competitive advantage have a positive and significant relationship.

Competitive Advantage to Mediate The Influence of Product Innovation and Entrepreneurial Orientation on ...
Competitive advantage is defined as the company's ability to create superior value to face competition and the ability of a business to achieve abnormal profits in industrial competition through a value creation strategy. Bharadwaj et al. (1993) explained competitive advantage is the result of implementing strategies that utilize various company resources. Competitive advantage is very necessary for bread SMI in maintaining its business to compete with similar competitors and, more importantly, win the competition among existing competitors. Dewi and Ekawati (2017) state that if a company already has a competitive advantage, it can be certain that the company will survive in an existing competition. A company or product must own an absolute competitive advantage to achieve better performance. Research from Meutia (2013) and Kamukama et al. (2011) suggested an influence between competitive advantage on performance. Amin et al. (2016), Ginting (2015), and Atalay et al. (2013) concluded that product innovation has a significant effect on marketing performance. The main focus of innovation is creating new ideas, which will be implemented into new products or new processes. Therefore, companies must be able to innovate their products to survive and still have a competitive advantage during increasingly fierce business competition. Meutia (2013) and Darroch (2005) found that innovation does not have a significant relationship with performance.
Research by Weerawardena and Coote (2001) concluded product innovation has a significant effect on competitive advantage. Innovation is defined as a process whereby the knowledge acquired by a company is integrated into products, processes, marketing methods, and managerial systems. Research findings Aziz and Samad (2016) revealed that innovation positively impacts competitive advantage. The results show that SMIs must invest in innovation to gain a competitive advantage. The research was supported by Chatzoglou and Chatzoudes (2017) and Kamboj and Rahman (2017), who concluded that product innovation influences competitive advantage.
Results of research by Zhang and Zhang (2012), Kajalo and Lindblom (2015), Sok et al. (2017), Buli (2017), Aminu et al. (2014), Kocak et al. (2017), Al Mamun et al. (2018), and Amin et al. (2016) states that there is an influence between entrepreneurial orientation on marketing performance. Merakati et al. (2017) explained that the entrepreneurial orientation depicts an entrepreneur taking advantage of opportunities in opening new markets and applying renewal (innovation) from existing ones. Research Buli (2017), explains that the dimensions of entrepreneurial orientation and market orientation have a positive influence on the performance of small business businesses. Research Endrik et al. (2017) concluded entrepreneurial orientation does not influence performance.
The results in these studies, the researcher is interested in further analyzing the relationship between product innovation and entrepreneurial orientation on marketing performance, to answer the gap in this study adding the variable competitive advantage, which means the superior management of SMIs in market competition, then can increase marketing performance. The addition of the variable competitive advantage is supported by research by Merakati et al. (2017) and Brahmanthara and Yasa (2017). They concluded that competitive advantage mediates product innovation and entrepreneurial orientation towards marketing performance.
Based on a search of the results of previous studies, the research hypothesis can be seen from the study's conceptual framework in Figure 1.
The hypotheses in this study are: Ginting (2015) and Amin et al. (2016) showed product innovation showed a significant effect on marketing performance. Research conducted by Atalay et al. (2013) describes positive and significant support for performance. H1: Product innovation has a positive effect on marketing performance Kajalo and Lindblom (2015) stated that entrepreneurial orientation acts as a basis for improving business performance among small retailers. Research by Zhang and Zhang (2012) The results of research conducted by Weerawardena and Coote (2001) and Kamboj and Rahman (2017), concluded that product innovation has a significant effect on competitive advantage. H3: Product innovation has a positive effect on competitive advantage Arbawa and Wardoyo (2018) prove that entrepreneurial orientation has a positive and significant effect on increasing competitiveness that is dominated by good business strategies. The strategic business applied is a competitive advantage, quality advantage, and product specialization. H4: Entrepreneurial orientation has a positive effect on competitive advantage Sigalas and Papadakis (2018) stated that there is a relationship between competitive advantage and superior performance. Kamboj and Rahman (2017) stated that competitive advantage partially mediates marketing capabilities for performance relationships. H5: Competitive advantage has a positive effect on performance marketing Research by Merakati et al. (2017) stated that product development requires effort, time, and capability, including the magnitude of risk and the cost of failure of competitive advantage is inseparable from the development of innovative products produced so that innovation can be used as a source of competitive advantage to the company's marketing performance. H6: Product innovation has a positive effect on marketing performance through competitive advantage Merakati et al. (2017) and Brahmanthara and Yasa (2017) stated that competitive advantage could be a factor that mediates entrepreneurial orientation. In contrast to research conducted by Martinette (2006), his research found that competitive advantage cannot mediate between entrepreneurial orientation towards marketing performance. H7: Entrepreneurial orientation has a positive effect on marketing performance through competitive advantage

METHODS
This study uses a quantitative approach to this type of research is explanatory research. The population in this study is the owner of Small and Medium Industries (SMIs) Bakery in Ponorogo Residence, who have done innovations in their products with a sample of 69 owners of SMI Bakery.

Entrepreneurial Orientation
Source: processed data (2019) The sampling technique used in this study is the census or total sampling technique, which is the same sampling technique as the number of existing populations. The analysis of the data used in this study uses the Partial Least Square (PLS) approach.

Evaluation of Outer Model
Evaluation of construct validity is done by calculating convergent validity and discriminant valid-ity. Convergent validity is known through-loading factors. An instrument is said to meet the convergent validity test if it has a loading factor above 0.6. The results of convergent validity testing are presented in Table 1 Table 2 uses discriminant reliability (AVE), Cronbach's alpha, and composite reliability. The reliability testing criteria are the value of reliability discriminant (AVE) gr eater than 0.5, value Cronbach's alpha greater than 0.7, and value composite reliability greater than 0.7.
Overall, by using AVE calculations, composite reliability, and Cronbach's alpha, it can be concluded that all instrument items that measure variables are declared reliable.

Inner Model Evaluation
PLS structural models in this study were tested by measuring the value of R2 (Goodness of Fit Model). The goodness of Fit Model informs the magnitude of the ability of endogenous variables in explaining the diversity of exogenous variables so that the magnitude of the contribution of exogenous variables to endogenous variables can be known. The goodness of fit Model in PLS analysis is measured using Q-Square predictive relevance (Q 2 ). Q 2 is based on the coefficient of determination of all dependent variables. The quantity of Q 2 has a range of values 0 <Q 2 <1, so the closer it is to number 1, the better the research model.  Competitive Advantage 0,686 Marketing Performance 0,818 Q 2 = 1 -(1 -R 1 2 )(1 -R 2 2 ) Q 2 = 1 -(1 -0,686) (1 -0,818) Q 2 = 0,943 Source: Primary data processed, 2019

Table 3. Results of Goodness of Fits Model
The calculation of Goodness of Fits in this study appears in Table 3. Q 2 in this study is worth 0.943 (94.3%) so that the overall model of 94.3% can explain the diversity of marketing performance variables. The contribution of a diversity of product innovation variables, entrepreneurial orientation, and competitive advantage to overall marketing performance was 94.3%. In comparison, the remaining 5.7% was contributed by other variables not included in the model.

Hypothesis Test
Hypothesis testing can be done by considering the level of significance and path coefficients between latent variables. Statistical analysis is performed by entering the variables tested together to test the proposed hypothesis. Decision-making is

Thus it can be concluded that:
H1, which states that Product Innovation has a positive effect on Marketing Performance, is accepted. H2 stating that Entrepreneurial Orientation has a positive effect on Marketing Performance is accepted. H3, which states that Product Innovation has a positive effect on Competitive Advantage, is accepted. H4, which states that Entrepreneurial Orientation has a positive effect on competitive advantage, is accepted. H5, which states that competitive advantage has a positive effect on Marketing Performance, is accepted. H6, which states that Product Innovation has a positive effect on Marketing Performance through Competitive Advantage, is accepted. H7, which states that Entrepreneurial Orientation positively affects Marketing Performance through Competitive Advantage, is accepted.

DISCUSSION
The results showed that product innovation had a positive and significant effect on marketing performance. These results indicate that improve marketing performance is built on product innovation with indicators of product quality, product variants, and product design. The consequence will be to in-crease marketing performance in increased sales turnover, increased sales growth, and expanding marketing areas for the products produced. The magnitude of the contribution of the product innovation variable shows that respondents want product innovation so that they tend to assess product innovation as good because SMI Bakery owners feel the need to develop or expand their products to meet the needs of consumers while paying attention to the flavors or desires of consumers so that products that are already developing and selling in the market can increase market share. Haji et al. (2017) states that product innovation is the result of the development of new products by a company or industry, both existing and not yet. From the old product that has reached the saturation point in the market, innovation is needed to replace the old product. The results of this study reinforce the research findings of Atalay et al. (2013), Ginting (2015, and Amin et al. (2016), which showed that product innovation has a significant effect on marketing performance.
The results showed that entrepreneurial orientation had a positive and significant effect on marketing performance. Entrepreneurial orientation can be the most important way a company is organized and is an important entrepreneurial contribution to based on the direction of the relationship and the significance of the model in question. Here are the results of the calculation of Partial Least Square.
Based on the

ables. Whereas the T statistic is used to see the significance of the relationship between variables.
The relationship is considered significant if the T statistic is greater than the T-table value.
company performance. Haji et al. (2017) states that entrepreneurial orientation is an organizational capability that contributes to creating unique organizational resources and positional advantages that affect performance. The results of this study reinforce the research findings of Zhang and Zhang (2012), Buli (2017) The results showed that product innovation had a positive and significant effect on competitive advantage. Innovation can be used as a source of competitive advantage through the company's ability to adapt to a dynamic environment. Innovations made in technical production are also part of the company's strategy to develop its business. In contrast, innovations made on products, both by increasing quality, product diversification, and differentiation, can provide many choices for consumers and strengthen brand names (Hartanty and Ratnawati, 2013). Bharadwaj et al. (1993) suggested that the company's ability to continue to innovate its products and keep those products according to the wants and needs of customers. The results of this study reinforce the Weerawardena and Coote (2001) and Kamboj and Rahman (2017), concluded that product innovation has a significant effect on competitive advantage.
The results showed that entrepreneurial orientation had a positive and significant effect on competitive advantage. The higher the entrepreneurial orientation, the higher the competitive advantage. The proactive nature of entrepreneurial orientation is needed to gain a wider market amid competition. Bharadwaj et al. (1993) stated that human resources who have entrepreneurial abilities have advantages in dealing with internal and external factors of the company so that they can better manage these factors into a business strategy that is beneficial to the company. Determining the right strategy will increase the company's competitiveness.
On the other hand, entrepreneurial orientation can grow because of economic urgency. In other words, entrepreneurial orientation can be built in a person. Starting from the courage to start a busi-ness, actively seeking information, dare to take risks, flexible and anticipatory (Hartanty and Ratnawati, 2013). The results of this study reinforce the Weerawardena and Coote (2001) and Platin and Ergun (2017), concluded that entrepreneurial orientation influences competitive advantage.
The results showed that competitive advantage had a positive and significant effect on marketing performance. Haji et al. (2017) states that competitive advantage is a development of a company's value for its buyers. Something that allows a company to obtain a higher profit compared to the average profit gained by competitors in the industry. The stronger the advantages, the higher the profits of the company and vice versa. Competitive advantage can be obtained from the company's ability to manage and utilize its resources and capital. Companies that can create competitive advantage will have the power to compete with other companies because their products will remain in demand by customers. Brahmanthara and Yasa (2017) explained that competitive advantage is the ability of top management to understand the process by which a company's ability is transformed into core competition to create opportunities for the company. A higher level of competitive advantage can lead to an increase in marketing performance. The results of this study reinforce Fatmawati (2016) and Sigalas and Papadakis (2018), who concluded that competitive advantage has a positive and significant effect on marketing performance.
The results showed that product innovation had a positive and significant effect on marketing performance through competitive advantage. Product innovation will be one of the competitive advantages to be gained by a company. Innovation is very important to be applied to bread SMIs products to increase competitiveness in trade and attract consumers so that competitiveness can be used to improve marketing performance. Ellitan (2006) explained that product innovation is a product development activity related to performance and is an important thing to consider in increasing productivity and global competition. Through product innovation, it can be expected to meet market demand and be used to improve performance marketing. Kotler and Competitive Advantage to Mediate The Influence of Product Innovation and Entrepreneurial Orientation on ... Armstrong (2008) explained that innovation is needed in improving marketing performance. That is because innovation is widely regarded as one of the most important sources of sustainable competitive advantage in an increasingly changing environment, because it leads to product and process improvement, makes sustainable progress that helps companies survive, allows companies to grow faster, more efficiently, and in the end, it becomes more profitable. The results of this study reinforce the research findings of Merakati et al. (2017) and Brahmanthara and Yasa (2017) stated that competitive advantage could be a factor that mediates product innovation.
The results showed that entrepreneurial orientation had a positive and significant effect on marketing performance through competitive advantage. Merakati et al. (2017), stated that entrepreneurial orientation illustrates an entrepreneur's aim to make use of opportunities in opening new markets and implementing updates of existing operations with the ability to innovate concerning perceptions and activities towards new and unique business activities. A proactive nature in entrepreneurial orientation is needed to get a wider market amid competition, thereby increasing Marketing Performance. Through entrepreneurial orientation, companies can assess what will be done in the short and long term. Dewi and Ekawati (2017) explained that the company must try to understand the strengths and weaknesses of existing competitors in the short term. In the long run, that is what the company must do to achieve marketing performance. The results of this study reinforce the research findings of Merakati et al. (2017) and Brahmanthara and Yasa (2017) state that competitive advantage can be a factor that mediates entrepreneurial orientation.

CONCLUSIONS
Product innovation has a significant effect on marketing performance. Strong product innovation will help companies develop ideas about new products, focus on efforts to produce products, and always strive to market varied products in the market so that by innovating products, marketing performance will increase. Entrepreneurial orientation has a significant effect on marketing performance. Entrepreneurial orientation plays a crucial role in ensuring the success of a marketing performance carried out and provides support and encouragement through entrepreneurial attitudes to achieve business success. The better the entrepreneurial orientation owned by owners of SMIs bakery in Ponorogo Residence, the company's achievement of the company's marketing performance will also be better.
Product innovation has a significant effect on competitive advantage. Product innovation is becoming increasingly important. Its existence is recognized as a strategy in responding to increasingly competitive business competition and has a major influence on its performance and competitiveness. Innovation can be used as a source of competitive advantage through the company's ability to adapt to a dynamic environment.
Entrepreneurial orientation has a significant effect on competitive advantage. Companies that have an entrepreneurial orientation will be able to innovate to create products that are unique/attractive compared to their competitors. Entrepreneurial orientation can be built in someone. Starting from the courage to start a business, actively seek information, dare to take risks, and be flexible and anticipatory.
Competitive advantage has a significant effect on marketing performance. Companies that can create competitive advantage will have the power to compete with other companies because their products will remain in demand by customers. A high competitive advantage reflects the high marketing performance in a company.
Product innovation has a significant effect on marketing performance through competitive advantage. Competitive advantage is inseparable from the development of the resulting innovation product, so it will have a competitive advantage in the market, which will subsequently win in a competition. In addition, innovation is very necessary for improving marketing performance. Innovation is considered one of the most important sources of sustainable competitive advantage in an increasingly changing environment.