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ABSTRACT:

Open innovation has an essential impact on innovation activities and the competitiveness of MSMEs. Apart from that, it is an exciting topic for academics and practitioners. Open innovation practices and human capital are more frequently discussed in large companies from a developed country perspective and are associated with higher business performance. However, the influence of the open innovation paradigm on human capital and its consequences on business performance in the context of developing countries have yet to be thoroughly explored. This research aims to analyze the influence of human capital and innovation culture in supporting open innovation practices on business performance. This research was conducted on MSMEs in Padang City, West Sumatra, Indonesia. Using quantitative methods, samples were taken using purposive sampling of as many as 200 MSME actors in Padang City. The findings in this research are that there is a positive and significant influence of human capital on open innovation, innovation culture on open innovation, and open innovation on business performance. Open innovation has also successfully mediated the relationship between human capital and business performance and innovation culture with business performance. The results of this research have important theoretical and practical implications for policymakers and MSME actors. These findings underscore the importance of human capital and innovation culture on business performance through open innovation. To improve MSMEs' performance, managers/owners must simultaneously strive to increase human capital and innovation culture through open innovation practices.

KEYWORDS:

Human Capital, Innovation Culture, Open Innovation, Business Performance

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