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This paper aims at investigating empirical study of the effect of relational capabilities (RC) and identifying the effect of value creation (VC) and market knowledge competence (MKC) to business performance on SMEs. This paper tries to develop and solve the problems of research gap on relational capabilities on business performance. Data were collected from 305 exported-furniture SME respondents in Central Java Indonesia. After validating test with the Confirmatory Factor Analysis (CFA), Structural Equation Modeling (SEM) analysis was used to measure direct and indirect effect to test the hypothesis model. There is a positive insignificant effect between relational capabilities and business performance, and there is a positive significant to value creation.In addition, the effect of the market knowledge competence on business performance and value creation has a positive significant impact. There is a positive impact between value creation on business performance. This paper contributes to solve the debate between relational capabilities on business performance controversy.

Mediating effect of value creation in the relationship between relational capabilities on business performance