ABSTRACT
The aim of this study is to analyze the effect of product innovation, market sensing capability, and value co-creation on firms’ performance. Small and Medium Enterprise (SMEs) Batik firms in Central Java are used as a sample. Sampling was done using a purposive sampling technique. Data were collected using a questionnaire given directly to the respondents. The total data that can be further analyzed comes from as many as 211 respondents. Data was analyzed using Structural Equation Modelling – (SEM) with the AMOS program assistance. The results shows that the product innovation has significant effects on value co-creation. In addition, value co-creation as a mediator in the product innovation relationship has significant effects on firms’ performance.
