Entrepreneurship in Indonesia

From Artisan and Tourism to Technology-based Business Growth

Vanessa Ratten, Vanessa Ratten

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781000470758
• Edition: 1
• Topic: Business
• Subtopic: Imprenditoria
• Index: Business

Whilst other countries in Asia particularly China and India have been studied in terms of entrepreneurial endeavours, there is a lack of research on Indonesia despite it being amongst the fastest growing economies in the world. Indonesia is also one of the largest recipients of venture capital in Asia. This book looks at the growth of entrepreneurship in Indonesia from artisan and cultural endeavours to an increased awareness of digital and technology-based forms of entrepreneurship.

The book examines the distinct cultural heritage of people in Indonesia towards entrepreneurial pursuits and analyses the role family and minority businesses play in the development of entrepreneurial capabilities. It stresses the need to focus on more categories of entrepreneurship in Indonesia such as artisan, tourism and sustainability in order to facilitate the growth of digital-based startups.

This book will be amongst the first to explore how Indonesia is leaping ahead of competitors in its quest to be a dominant world power through its entrepreneurial pursuits.

1 Indonesian entrepreneurship

DOI: 10.4324/9781003187769-1

Origins, conceptualisation and practice

Vanessa Ratten

Introduction

A vast body of research exists on entrepreneurship in North America and Europe, which has influenced the way entrepreneurship is conceptualised and studied (Adobor, 2020). This has meant most theories and conceptualisations of entrepreneurship are premised on a developed country context. Entrepreneurship occurs in different ways so it is important to consider other contexts. The stereotype of entrepreneurship occurring in only developed economies is not true as it also occurs in emerging economies. Thus, in the past decade, there has been a flurry of interest in entrepreneurship in other contexts particularly in Asia. This has led to the growth of studies on Asian entrepreneurship. However, most of these studies focus on countries such as China and India so there has been limited interest in entrepreneurship in other Asian countries. This book seeks to remedy this by focusing on the Indonesian context, thereby offering a novel and new perspective on how entrepreneurship develops based on regional, cultural and economic activity.

Entrepreneurship research in Indonesia presents a rich research domain by offering exciting research opportunities and the possibility of creating new theory (Anggadwita, Ramadani, Alamanda, Ratten, & Hashani, 2017). Indonesian entrepreneurship involves the creation and development of new ventures by Indonesian people or people with a connection to Indonesia. This can involve public, private, non-profit entities or a combination of all. The outcomes of Indonesian entrepreneurship can extend beyond Indonesia, as globally much interesting work on Indonesia is emerging. This growing body of literature is classified as “Indonesian entrepreneurship” and may include other geographic areas.

Indonesian entrepreneurship as a topic will continue to be a popular focus of study. More researchers in Indonesia and globally will shift their attention to studying entrepreneurship. This is due to the concept of Indonesian entrepreneurship attracting the attention of political and academic authorities and also to the way entrepreneurship contributes to regional development and economic growth. Researchers need to better understand what drives success in Indonesian entrepreneurship. Success is based on subjective assessments of business activity so it must consider cultural factors. This means that it can include the amount of entrepreneurial activity taking place in a region or how entrepreneurship contributes to the social fabric of a place (Singh, Corner, & Pavlovich, 2007). As the body of literature on Indonesian entrepreneurship develops, it is helpful to identify challenges for the future (Patria, Usmanij, & Ratten, 2019). These challenges are based on the emerging body of knowledge on Indonesian entrepreneurship that is still developing. As research on Indonesian entrepreneurship is still in its nascent stage, its underpinnings remain based on traditional entrepreneurship theory (Erista, Andadari, Usmanij, & Ratten, 2020).

This book responds to calls to advance the entrepreneurship field by looking at new contexts. By focusing on Indonesia, it extends our current knowledge on Asian entrepreneurship by focusing more specifically at the country-level context. Currently whilst there is much anecdotal evidence about entrepreneurship in Indonesia, the English written work on this topic is sparse. This means that the conditions and timing are right for a book on Indonesian entrepreneurship. Indonesia offers unique opportunities for new insights into entrepreneurship to emerge. Most existing entrepreneurship research is biased in terms of assuming a free market economy and similar cultural conditions (Ratten, 2014a). This is not always true as there is great diversity in entrepreneurship practices.

This chapter will provide an overview of Indonesian entrepreneurship by discussing the history and culture of the country in terms of how that affects business activity. The role of entrepreneurship in society is then discussed that highlights the need for an Indonesian understanding of entrepreneurship.

Indonesia

Indonesia is a fast-growing country with the number of people living below the poverty line having decreased in recent years (Tajeddini, Ratten, & Denisa, 2017). This has led to an increase in the middle class and a booming economy. The main ethnic groups in Indonesia are the Javanese, Sundanese, Madura and Malay. Indonesia is the world’s largest Islamic state although it is a secular state. Indonesia is located in the Indian and Pacific oceans. It is on the equator so it has a warm climate for most of the year. The main island of Indonesia is Java, on which its capital Jakarta is located. Previously Indonesia was called the Dutch East Indies when it was under Dutch rule. Indonesia was occupied by the Japanese during World War II then granted its independence from the Netherlands in 1945. Indonesia includes a biodiversity unparalleled in other parts of the world. Many of the islands are on tectonic plates and subject to volcanic activity. This results in a diverse environment with a close proximity to the sea. Indonesia is the largest country in Southeast Asia and has a tropical temperate. It shares a border with Papua New Guinea and Malaysia. Many of the islands in Indonesia due to their small size or location are uninhabited.

The rapidly transforming economy of Indonesia has kick-started an emphasis on entrepreneurship. This has led to more people adopting an entrepreneurial mindset with regards to business ventures. In addition, Indonesia has continued to implement ambitious market reform, thereby further fuelling its economic growth rate. This has lifted their economy and increased the standard of living for many of its citizens.

The Indonesian economy has undergone a transformation in recent years with more open trade and investment policies. Moreover, the growing middle class has led to an increase in domestic consumption. Indonesia has a younger population than other countries with a significant percentage of people under the age of thirty years old. This has led to an increase in the percentage of people in the workforce. In addition, there are strong intra-regional and international trade flows in Indonesia. The more well-known tourist destinations in Indonesia are Bali, Lombok and Komodo. However, most of the business and governmental activities reside on the main island of Java. The main economic sector is the manufacturing sector including the chemical, textiles and transportation industries. The agricultural sector is also important in terms of farming, fishery, forestry and plantation. The mining and hospitality sectors also comprise a large percentage of the overall gross domestic product. Indonesia in recent years has been amongst the world’s best performing economies, and this is expected to continue in the future. Indonesia is a relationship-driven market with business relationships based on trust. This means that social networks are key to successfully doing business in Indonesia.

Indonesia consists of five main islands: Java, Sumatra, Kalimantan, Sulawesi and Papua as well as many smaller islands. Indonesia is the largest archipelago in the world and includes more than 17,000 islands. This is in distinct contrast to other countries that normally have one large connected landmass. As an archipelago, the sea is important as it provides a way to travel between islands. Indonesia is positioned between two oceans: the Indian and Pacific. Most of the land in Indonesia is mountaineous and in a sub-tropical climate. The Indonesian climate includes a wet northwest monsoon that occurs between December and March then a dry east monsoon from June to September. The warm climate impacts the type of business activity practised in the country. There is a large percentage of land covered in forest that means in many places there is fertile soil. The high volume of rainfall means there is an abundance of land for farming. Indonesia has an interesting history with the arrival of Hindu kingdoms, Indian Buddhists and Muslim traders. The Dutch occupation of Indonesia lasted more than 300 years and influenced the development of the country. Many of Indonesia’s laws and regulations are still based on Dutch law.

Indonesia is amongst the most populous countries in the world, but the population distribution is highly concentrated on the main island of Java. At the heart of Indonesia’s culture is the traditional decision-making rule called ‘musyawarah dan mufakat’, which means mutual agreement and solidarity. The Indonesian state philosophy is called the ‘pancasila’, which refers to the five principal beliefs of one supreme God, humanity, unity, democracy and social justice.

Entrepreneurship

There is no consensus about how to define entrepreneurship, but most definitions imply that there needs to be innovation, proactiveness and risk taking involved (Assudani, 2009). This means that entrepreneurship in any context means doing something new related to a business activity (Ferreira, Fernandes, & Ratten, 2017). Entrepreneurship is normally not only considered as a positive activity due to the way it promotes job growth but can also be considered in a negative context as it encourages risk-taking activity. Woodfield et al. (2017: 123) define an entrepreneur as “someone who undertakes a project with assumed risk and an economic outcome”. This means an entrepreneur differs from a business person due to the way they engage in business activity based on a degree of risk (Ferreira, Ratten, & Dana, 2017). Entrepreneurship is defined as “a set of personality traits (such as, for example, need for achievement, locus of control, risk-taking propensity, creativity) that, influenced by external variables (such as level of education, tenure, age, previous experiences, institutional and socio-economic factors) show the attitude of a person toward the good governance and management of a firm” (Gordini & Rancati, 2015: 172). This definition highlights the personality traits of entrepreneurs and the role of environmental contexts.

Entrepreneurship is based on perceptions in terms of how an entrepreneur carries out their activities. A key characteristic of an entrepreneur is their willingness to engage in risk. This means that they pursue business opportunities that have uncertain outcomes. Therefore, an entrepreneur not only is perseverant but also has a sense of independence in their business life. This means that they tolerate ambiguity and are able to identify opportunities. There is much diversity amongst entrepreneurs in terms of their psychological profile to the type of entrepreneurship they are engaged in. This means that there is not a general way to describe an entrepreneur as it rather depends on the context. Entrepreneurs can differ based on gender, location and level of activity. Historically much research assumed entrepreneurs to be men but this has changed with the emergence of research on women entrepreneurship. Entrepreneurship studies have tended to be based on developed country locations but this too has changed with increased interest in emerging markets. Entrepreneurship can be corporate-based or the prerogative of small business owners. This means entrepreneurship can vary from sporadic activity to continual and lengthened forms of business development.

Entrepreneurship is a dynamic process that involves creating value. To do this, business opportunities are exploited through innovative action. Entrepreneurs are a catalytic agent of change as they enable new business models to emerge in the global economy. Entrepreneurs have a number of personality traits such as a willingness to persevere despite hardship and a sense of independence that distinguishes them from non-entrepreneurs. This means entrepreneurs may be regarded as organisers that pursue innovation. They initiate action through a decisive mindset that enables ideas to progress in the marketplace. Effective entrepreneurs are needed in all contexts but particularly in emerging economies that are undergoin...