THE INFLUENCE OF CORE COMPETENCY ON COMPETITIVE STRATEGY AND ITS IMPACT ON THE PERFORMANCE OF THE SHARIA BASED FINANCIAL INSTITUTIONS IN ACEH PROVINCE, INDONESIA

Abstract

The main purpose of the research are to investigate the causal relationship between core competency on the performance (e.g. revenue growth, market share, and customer satisfaction) of the sharia financial institutions in the Province of Aceh, Indonesia with competitive strategy) as an intervening variable The research employed a quantitative survey toward 252 managers (top manager, middle managers, and operational managers) selected from 79 The Sharia based Financial Institutionsin the several regencies and cities of the Aceh Province. Hence, the type of research designs used is descriptive, verificative, and explanatory survey. While the research employed a five-rating likert scale measurement, and distributed the questionnaires as a data collecting tools, the collected data are processed by using Structural Equation Model (SEM) approach – AMOS SPSS version 22. The outcome of research revealed that core competency has a significant and positive influence on the performance of the The Sharia based Financial Institutions in the region either directly or through intervening variable of competitive strategy; the direct effect of core competency variable on performance is lower than that of the indirect effect of core competency on performance through intervening variables of competitive strategy The other findings are the dimension of Rarity was the main determinant contributing to core competency, the dimension of focused differentiation strategy was a dominating dimension affecting of competitive strategy, and market share was a main determinant that forming the performance of the firm. The empirical research investigating the causal relationship between core competency and business performance employing competitive strategy as an intervening variable in the context of the Sharia based Financial Institutions is the originality of the research. It is expected to give a valuable inputs for managers and stakeholders in the industry and contribute the literature of strategic management and Islamic finance and banking