Information and Knowledge Management www.iiste.org ISSN 2224-5758 (Paper) ISSN 2224-896X (Online) DOI: 10.7176/IKM Vol.9, No.6, 2019 29 Measuring the Organizational Innovation Capabilities (A case study of SMEs Food Industry in Surabaya-Indonesia) Oliandes Sondakh Business School, Universitas Pelita Harapan, Surabaya Campus, Indonesia Abstract The presence of Micro, Small and Medium Enterprises (MSMEs) is consider as one of the most important drivers of the economy in Indonesia. The existence of MSMEs can also be the backbone of the community's economy which plays an important role in growing the economy of a region. As happened in East Java Province- Indonesia. MSMEs sector contributes greatly to the economy of East Java. Therefore, the power of small and medium enterprises should not be underestimated. Innovation and development must target MSMEs. Innovation is believed to be an important thing to do in organizations because it can derived organizational success. Specific attributes of Organizational Innovation Capabilities that companies can use to build a company's competitive advantage are: Product Innovation Capabilities and Process Innovation Capabilities. The results of data analysis show that Organizational Innovation Capability is best reflected by Product Innovation Capability, followed by Process Innovation Capability. Future research on different dimension of Organizational Innovation Capability needed to get boarded overview of SMEs Organizational Innovation Capability. Keywords: Organizational Innovation Capability, Product Innovation Capability, Process Innovation Capability DOI: 10.7176/IKM/9-6-05 Publication date:June 30 th 2019 1. Introduction The presence of Micro, Small and Medium Enterprises (MSMEs) is consider as one of the most important drivers of the economy in Indonesia. The monetary crisis that hit Indonesia in 1998 has proven that MSMEs actually survive when giant companies fall out (Susanti, 2018). In 2018, MSMEs in Indonesia dominate business units to 99.9% of a total of 57.89 million, with a significant contribution to employment absorption of 96.9%, GDP of 57.56% and exports of 15.68% (Yasmin, 2018). For 2019, the contribution of MSMEs sector to the national Gross Domestic Product (GDP) is projected to grow by 5%. With the estimated growth, it is expected that the total contribution of MSMEs to the GDP can reach 65% or around Rp 2,394.5 trillion. Meanwhile, the realization of the contribution of MSMEs to the national GDP in 2018 reached around 60.34% (Syarizka, 2019). The existence of MSMEs can also be the backbone of the community's economy which plays an important role in growing the economy of a region. As happened in East Java Province-Indonesia. MSMEs sector contributes greatly to the economy of East Java. It was recorded in the first semester of 2018, East Java's economic growth reached 5.57% with GDP at Current Prices reaching Rp544.44 trillion. This achievement was due to the support of MSMEs in East Java. MSMEs also contribute greatly to the realization of investment. The investment realization in East Java in 2017 from the MSMEs sector amounted to Rp152.39 trillion. In the first semester of 2018 it amounted to Rp.95.95 trillion, up 22.87% from the same period in 2017. During 2017, the contribution of MSMEs to total investment reached 56.34%. In the first semester of 2018 it rose to 74.36%. This increase is in line with the rapid growth of MSMEs in East Java. Based on the national economic census, the East Java MSMEs population grew from 6.8 million in 2012, to 9.59 million in 2017 (Hakim, 2018). Therefore, the power of small and medium enterprises should not be underestimated. Innovation and development must target MSMEs. Innovation is believed to be an important thing to do in organizations because it can derived organizational success (Damanpour & Gopalakrishnan, 1998; Jiménez-Jiménez & Sanz-Valle, 2011; Yesil & Sozbilir, 2013; Vila & Coll-Serano, 2014). Innovation is considered as an organization's way to develop innovative products and services to the public so they can compete in their business environment (Schermuly, Meyer, & Dammer, 2013). Organizations are required to realize that creating new processes and products is very important for organizational growth and productivity in all sectors (Patterson, Kerrin, & Gatto-Roissard, 2009), especially in very turbulent market conditions. Organizational innovation capabilities lead organizations to develop innovations continuously to respond to a changing market environment and are embedded with all strategies, systems and structures that support innovation in an organization (Gloet & Samson, 2016). Organizational