Abstract

Small and medium enterprises have a contribution to economic development. Islamic works ethics and collaborative

networks are needed to improve the performance of small and medium enterprises. The aim of the study is to examine

the effect of Islamic works ethics and collaborative networks on the capability of innovation and business performance.

The research recipient is 89 leaders of fashion small and medium enterprises in Semarang and the sampling method

uses purposive sampling. The results showed that Islamic works ethics and collaborative networks had a significant

effect on the capability of innovation. Furthermore, Islamic work ethics and the capability of innovation also have a

significant effect on business performance, while collaborative networks have no significant effect on business

performance. Effect of Islamic work ethic on business performance is not mediated by innovation capabilities, while

the influence of collaborative network on business performance is mediated by innovation capabilities.

Keywords: Collaborative Network, Islamic Works Ethic, Innovation Capability, Business Performance.