STRATEGIC ALLIANCES: STRATEGY IN REALIZING THE COMPETITIVE ADVANTAGE OF RURAL BANKS IN INDONESIA THROUGH DIGITAL INNOVATION AND BUSINESS DIGITALIZATION
Gaguk Dwi Prasetyo Atmoko (1), Harjanto Prabowo (2), Mohammad Hamsal (3), Firdaus Alamsjah (4)

Management Department, BINUS Business School Doctor of Research in Management, Bina Nusantara University, Jakarta, Indonesia 11480

Abstract

Rural Bank is an intermediary agency with an important role in supporting economic activities through collecting and distributing third-party funds to real sector funding. The performance of third-party funds collection from 2016 to 2022 shows an increase from 75.7 trillion to 123 trillion. Credit channeling also increased from 81.7 trillion to 126 trillion in the same span. However, the market share of Rural Banks is less than 2%, which is considered low and shows that Rural Banks^ competitiveness is still lower compared to the other financial service industry. The advancement of digital financial technology or Fintech may disrupt financial services and interfere with the performance of Rural Banks, which can be seen through the decreasing number of Rural Banks from 1633 in 2016 to 1426 in March 2023. Financial limitation becomes a challenge for Rural Banks in implementing Digital Innovation and Business Digitalization, including synergizing with other parties to improve customer services, which enhances Rural Banks^ competitive advantage. Therefore, this study aims to explain that Strategic Alliances are a strategy to enhance the competitive advantage of Rural Banks through Digital Innovation and Business Digitalization. Data collection was conducted by surveying directors or other top management who understand the business of Rural Banks in the conventional type, using the probability-stratified random sampling method, which was then analyzed using Partial Least Square (PLS)-Structural Equation Modeling (SEM). Out of 151 respondents, it is found that realizing Digital Innovation and Business Digitalization through Strategic Alliances is the key to promoting the competitive advantage of Rural Banks, where Digital Innovation and Business Digitalization positively impact promoting Strategic Alliance, which contributes to achieving Competitive Advantage

Keywords: Digital Innovation, Business Digitalization, Strategic Alliance, Competitive Advantage, Rural Banks

Topic: Business and Economic