Non-market strategies and Indonesian SMEs: casualties of decentralisation?

Abstract

Purpose The purpose of this paper is to examine the non-market strategies adopted by government-contracted small and medium enterprises (SMEs) in order to address the challenges they faced in the business of procurement. Although SMEs are important contributors to employment and the national economy, they demonstrated different levels of effectiveness depending on the management strategies they adopted. Design/methodology/approach Using case study methodology, data were gathered by conducting interviews with the owners/managers of Indonesian SMEs. Findings were analysed using the (ia)3 framework developed to assist the understanding of non-market environments. Findings Findings indicated that a key characteristic of the Indonesian non-market environment was the influence of the government and Indonesian society. This led to differing degrees of dissatisfaction among SME owners and managers who reported that they had to work within a number of constraints for business survival, while simultaneously learning how to “play the games” demanded by the business and regulatory environment. Research limitations/implications Limitations relate to the number of empirical cases represented and the geographical area covered. Further research is recommended in order to provide the opportunity for research generalisation. Practical implications These findings illustrate the need for transparency and integrity in the procurement process in relation to Indonesian SMEs. It is proposed that SMEs in similar sectors may benefit from forming strategic alliances/industry clusters to support future knowledge sharing and promote their collective voice. Originality/value To date, studies on non-market strategies have largely focused on developed countries and large firms. Consequently, this paper goes some way towards bridging the gap in the non-market environment in developing countries concerning SMEs and potential strategies for adoption.

Virtue or vice? Public policies and Nigerian entrepreneurial venture performance

“…Participants particularly highlighted instances of collaborations amongst federal and state agencies in the performance of their respective mandates with respect to the processes and operations of MSMEs. For instance, like literature had reported in Indonesia (Sanusi and Connell, 2018) and Lesotho (Khoase and Govender, 2013), at the State Ministry of Commerce, Industry, Cooperatives and Empowerment, a “one stop shop” exists through which relevant federal and state agencies have desk officers working together to ease business registration. In addition to enhancing the establishment and functionalities of MSMEs, this underscores collaborative actions of federal and state actors in smoothening the activities and processes of MSMEs.…”

“…With respect to what business associations can contribute to MSMEs development in developing countries, Sanusi and Connell (2018, p. 212) advocate for “industry clusters” where SMEs “form strategic alliances with other SMEs in the same sector’ as key to addressing the challenges they face. Das and Rangarajan (2020, p. 612) similarly emphasise the relevance of “collaborative synergy” amongst businesses, which effectively leverages “networks and alliances […] to solve common problems and achieve inclusive growth.” While associations emerging from such alliances serve advisory purposes for MSMEs, they perform other functions of providing marketing and collective purchasing, self-regulation, knowledge and resource sharing, project collaborations, lobbying and representation of members' interests (Bennett and Ramsden, 2007; Olorunshola and Odeyemi, 2020).…”

“…Das and Rangarajan (2020, p. 612) similarly emphasise the relevance of “collaborative synergy” amongst businesses, which effectively leverages “networks and alliances […] to solve common problems and achieve inclusive growth.” While associations emerging from such alliances serve advisory purposes for MSMEs, they perform other functions of providing marketing and collective purchasing, self-regulation, knowledge and resource sharing, project collaborations, lobbying and representation of members' interests (Bennett and Ramsden, 2007; Olorunshola and Odeyemi, 2020). In effect, such “SME coalitions and networks’ also serve to benefit “both the governments and SMEs concerned’ (Sanusi and Connell, 2018, p. 212), or, to borrow from Zulu-Chisanga et al. (2021, p. 188), the “inter-firm collaboration’ enhances MSME performance.…”

“…In South Africa, Tsoabisi (2012), identified positive contributions of local governments as aiding policy implementation for MSME development. On the contrary, focussing on Indonesia, Sanusi and Connell (2018) found that decentralisation, which aimed at "[distributing] financial budgeting and authority to local governments" (p. 205) and enhancing "increased responsiveness to local needs" resulted in situations where "the new political and economic systems did not create the expected supportive environment for local investors or SMEs" (p. 3). Nigeria's decentralised system similarly enables influences of subnational governments in terms of policy intervention, because of their proximity to the local population.…”

Influence of Information Technology towards the Development Economics of SMEs in Indonesia

“…When the economic crisis hit the world automatically worsened the economic conditions in Indonesia. Crisis conditions occurred in the period of 1997 to 1998, and only the SME sector was able to remain stable (Sanusi & Connell, 2018). SMEs are productive businesses to be developed to support macro and microeconomic development in Indonesia and affect other sectors that can develop (Hutahayan & Yufra, 2019).…”