Essential Dimensions of Internal Sharia Capital to Enhance Business Performance of Sharia Banking in Indonesia

Purpose: Sharia banks in Indonesia are having difficulty competing with conventional banks and maximizing their business performance. Several perspectives underline the importance of internal resources in optimizing the company’s business performance. This study seeks to measure internal resources found in the largest sharia bank in Indonesia and see its influence on the company’s business performance. This study also examines the mediation of innovation and collaboration strategies in the influence of internal sharia capital on business performance. Design/methodology/approach The research was conducted on the largest sharia bank in Indonesia, Bank Syariah Indonesia, through quantitative study using PLS-SEM with SmartPLS software. A total of 285 managers from across the country were involved in this study. Findings The results confirm that internal sharia capital positively and significantly affect business performance, innovation strategies, and collaboration strategies. Innovation and collaboration strategies also significantly influence business performance, giving both a significant mediation role to the main relationship. Originality The originality in this research lies in the integration of resource-based view theory (RBV) as the grand theory with resource-advantage theory (R-A) as the middle-range theory. A greater percentage of indirect influence compared to direct influence indicates that the combination of these two theories has proven to give highly significant results on BSI's business performance. This research also proves that internal sharia capital enhanced with innovation and collaboration strategy can give more positive effects to business performance.