Skip to main content
SpringerLink
Log in

The role of small firms in Indonesia

  • Published:
Small Business Economics Aims and scope Submit manuscript

Abstract

During the last two decades small firms in developing countries have received more and more attention from researchers and policy makers. For this, several reasons have been brought forward. The decline in labour absorption in agriculture and the slow growth of employment opportunities in the other sectors of the economy, combined with the fact that the growth of the labour force has accelerated, have led to un- and under-employment problems in many of these countries.

Small firms are generally viewed as a useful means of alleviating these problems, because medium and large firms only would not help to solve the problems. However, from this study it can be concluded that the medium and large firms in the manufacturing sector in Indonesia are doing better in employment and income than generally anticipated.

The purpose of this study is to examine the relative pattern of change and development of small firms in the manufacturing sector in Indonesia in the last two decades and possible factors affecting their growth. Also the relative importance of small firms in terms of income generation will be assessed.

The study will use national data collected from the Department of Industry and Central Bureau of Statistic in Indonesia. Further, the study will be based, for its theoretical analysis, on relevant literature on the subject and on some empirical studies in Indonesia as well as in other developing countries.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Acs, Zoltan J. and David B. Audretsch, 1989a, ‘Technological Regimes, Learning, and Industry Turbulence’, Discussion Paper (FS IV-89-12), Wissenschaftszentrum Berlin.

  • Acs, Zoltan J. and David B. Audretsch, 1989b, Small Firms and Technology, Den Haag: Directie Algemeen Technologiebeleid, Ministerie van Economische Zaken.

    Google Scholar 

  • Acs, Zoltan J. and David B. Audretsch, 1990a, ‘The Entrepreneurial Regime, Learning, and Industry Turbulence’, Small Business Economics 2(2), 119–128.

    Google Scholar 

  • Acs, Zoltan J. and David B. Audretsch, 1990b, Innovation and Small Firms, Cambridge: MIT Press.

    Google Scholar 

  • Amjad, R., 1984, ‘Small-Scale Industries and Rural Development: Implications for Rural Industrialization in Pakistan’, in E. Chuta and S. V. Sethuraman (eds.), Rural Small-Scale Industries and Employment in Africa and Aisa, Geneva: ILO.

    Google Scholar 

  • Anderson, D., 1982, ‘Small Industry in Developing Countries: A Discussion of the Issues’, World Development 10(11), 913–948.

    Article  Google Scholar 

  • Andriessen, B. and K. van den Broek, 1988, ‘Small Town Enterprises and Regional Development: The Case of Purworejo — Klampok, Central-Java’, Discussion Paper (38), January, Utrecht.

  • Arian, C. and L. Dongelmans, 1989, Small Scale Industry in Aceh Utara and Aceh Tengah, Banda Aceh: Bappeda/IDAP.

    Google Scholar 

  • Arief, K., 1981, ‘Small Scale Enterprises and Small Enterprise Credit Programs in Indonesia: Background and Experience’, paper presented at Asian Regional Meeting or Donor Agencies on Small Scale Enterprise Development, 8–11 December, ESCAPLE, Colombo.

  • Arndt, H. W., 1979, ‘Monetary Policy Instruments in Indonesia’, Bulletin of Indonesian Economic Studies 16(3), 107–122.

    Google Scholar 

  • Bruch, Mathias and Ulrich Hiemenz, 1983, ‘Small-and Medium-Scale Manufacturing Establishments in ASEAN Countries: Perspectives and Policy Issues’, Economics Staff Paper (14), Manila: Asian Development Bank.

    Google Scholar 

  • Bruch, Mathias and Ulrich Hiemenz, 1984, Small-and Medium-Scale Industries in the ASEAN Countries: Agents or Victims of Economic Development?, Boulder: West-view.

    Google Scholar 

  • Carlsson, Bo, 1984, ‘The Development and Use of Machine Tools in Historical Perspective’, Journal of Economic Behavior and Organization 5, 91–114.

    Article  Google Scholar 

  • Cohen, S. I., L. Dongelmans, and C. Arian, 1989, ‘Profiles and Problems of Regional Small-Scale Industry. A Case Study of Indonesia’, paper presented at the EUR/ILO Workshop on Employment Processes and Economic Change, 30–31 January, Rotterdam: Erasmus University Rotterdam.

    Google Scholar 

  • Donges, J. B., B. Stecher and F. Wolter, 1974, ‘Industrial Development Policies for Indonesia’, Kieler Studien, 126, Tubingen.

  • Erquiaga, P., 1987, ‘Improving Domestic Resources Mobilization Through Financial Development-Indonesia’, Asian Development Bank Economic Staff Paper (40), Manila: Asian Development Bank.

    Google Scholar 

  • Ghatak, Subrata, 1981, Monetary Economics in Developing Countries, Macmillan Press Ltd.

  • Gort, M., and S. Klepper, 1982, ‘Tome Paths in the Diffusion of Product Innovations’, Economic Journal 92, 630–653.

    Article  PubMed  Google Scholar 

  • Grizzell, S., 1988, ‘Promoting Small-Scale Manufacturing in Indonesia. What Works?’, Development Studies Project Research Memo (39), Jakarta: Bappenass-BPS, 17 March.

    Google Scholar 

  • Haggblade, S., and C. Liedholm, 1989, ‘The Effect of Policy and Policy Reforms on Non-Agricultural Enterprises and employment in Developing countries: A Review of Past Experiences’, paper presented at the Conference on Policy Approaches Toward Technology and Small Enterprise Development, June 5–7. The Hague: Institute of Social Studies.

    Google Scholar 

  • Hart, G. P., 1978, Labour Allocation Strategies in Rural Javanese House holds', PhD Thesis, Cornell.

  • Heinen, E., 1987, ‘Family Labour Supply for Nonfarm Activities: An Introduction to Theoretical and Empirical Approaches of Household Labour Allocation, with Special Reference to Java’, Collaboration Series (13), Fakultas Ekonomi, Universitas Kristen Satya Wacana, Salatiga.

    Google Scholar 

  • Heinen, E., 1988, ‘Coping with Heterogenity and Dualism in the Non-Farm Sector; A Case Study Using Data from the Indonesian Provinces’, paper presented at the International Seminar On Rural Non-Farm Activities in Indonesia, University of Amsterdam, 15 January, Amsterdam.

  • Hiemenz, U., 1982, ‘Industrial Growth and Employment in Developing Asian Countries: Issue and Perspectives for the Coming Decade’, Asian development Bank Economic Staff Paper (7), Manila, March.

  • Hill, H., 1987, ‘Concentration in Indonesian Manufacturing’, Bulletin of Indonesian Economic Studies 23(2), 71–100.

    Google Scholar 

  • Hoselitz, B. F., 1959, ‘Small Industry in Underdeveloped Countries’, Journal of Economic History 19(1), 600–618.

    Google Scholar 

  • Islam, Rizwanul, 1987, ‘Rural Industrialisation and Employment in Asia: Issues and Evidence’, in R. Islam (ed.), Rural Industrialisation and Employment in Asia, Geneva: International Labour Organisation.

    Google Scholar 

  • Korns, A., 1988, Industry Data at BPS', Development Studies Project, Jakarta.

    Google Scholar 

  • Kuyvenhoven, A., and H. Poot, 1990, ‘Industry and Trade in Indonesia’, Oeconomic 4(1), Student's Bulletin of Economic Development Studies, Rotterdam: Erasmus University of Rotterdam.

    Google Scholar 

  • Lee, E., 1984, ‘Agrarian Changes and Poverty in Rural Java’, in A.R. Khan and E. Lee (eds.), PitPoverty in Rural Asia, Bangkok: ILO-ARTEP.

    Google Scholar 

  • Liedholm, C., and D. Mead, 1987, ‘Small Scale Industries in Developing Countries: Empirical Evidence and Policy Implications’, MSU International Development Paper (9), East Lancing: Michigan State University.

    Google Scholar 

  • McCawley, P., 1979, ‘Industrialization in Indonesia: Developments and Prospects’, Occasional Papers (13), Australian National University: Canberra.

    Google Scholar 

  • Mcleod, R., 1984, ‘Case Studies of Small Business Financing in Indonesia’, Economics and Econometrics Working Paper (101), Australia National University.

  • Mead, D., 1985, ‘Subcontracting Systems and Assistance Programs: Opportunities for Intervention’, MSU International Development Worker Paper (4), East Lancing: Michigan State University.

    Google Scholar 

  • Misra, R. P. (ed.), 1985, Rural Industrialisation in Third Word Countries, Introduction, New Delhi.

  • Muray, Y., 1980, ‘The BIMAS Programme and Agricultural Labour in Indonesia’, Developing Economies XVIII(1), 23–44.

    Article  Google Scholar 

  • Page, J., and W. Steel, 1984, ‘Small Enterprise Development: Economic Issues from African Experience’, World Bank Technical Paper (26), Washington, D.C.: World Bank.

    Google Scholar 

  • Pakes, A., and Ericson, R., 1987, ‘Empirical Implications of Alternative Models of Firm Dynamics’, manuscript, Department of Economics, University of Wisconsin-Madison.

  • Philipsen, E. E., 1990, Small-Scale and Cottage Industries in Indonesia. Some Facts and Figures, unpublished Masters Thesis, Erasmus University Rotterdam.

  • Piore, Michael J., and Sabel, Charles F., 1983, ‘Italian Small Business Development: Lessons for U.S. Industrial Policy’, in John Zysman and Laura Tyson (eds.), American Industry in International Competition, Ithaca, NY: Cornell University Press.

    Google Scholar 

  • Piore, Michael J., and Sabel, Charles F., 1984, The Second Industrial Divide: Possibilities for Prosperity, New York: Basic Books.

    Google Scholar 

  • Pitt, M. M., 1981, ‘Alternative Trade Strategies and Employment in Indonesia’, in A. O. Krueger, H. B. Lary, T. Monson and N. Akrasanee (eds.), Trade and Employment in Developing Countries (1), Chicago: Chicago University Press, pp. 181–238.

    Google Scholar 

  • Poot, H., 1988, ‘Estimation of Manufacturing Value Added’, Technical note, No. 8. Industry Analysis Project DTA-256, Ministry of Industry, Jakarta.

    Google Scholar 

  • Poot, H., 1989, ‘Observations on Recent Estimates of Indonesian Manufacturing Value Added’, Technical Note (13), Industry Analysis Project, Centre for Data Processing and Analysis, Ministry of Industry, Jakarta.

    Google Scholar 

  • Poot, H., A. Kuyvenhoven, and J. C. Jansen, 1988, ‘Industrialization and Trade in Indonesia. Part I/II’, Discussion Paper (83a), Rotterdam: Centre for Development Planning, Erasmus University Rotterdam.

    Google Scholar 

  • Babenau, K. von, 1976, ‘Trade Pollicies and Industrialization in a Developing Country: The Case of West Malaysia’, The Malaysan Economic Review 21(1), 23–46.

    PubMed  Google Scholar 

  • Rietveld, P., 1984, ‘Regional Production and Expediture in Kabupaten Boyalali’, Seri Lalap (5), FE-UKSW, Salatiga.

    Google Scholar 

  • Rietveld, P., 1986a, Rural Small Scale Industries in Developing Countries: Indonesian Experience, Department of Economics, Amsterdam: Free University of Amsterdam.

    Google Scholar 

  • Rietvld, P., 1986b, ‘Non-Agricultural Activities and Income Distribution in Rural Java’, Bulletin of Indonesian Economic Studies 22(3), 106–117.

    PubMed  Google Scholar 

  • Rietveld, P., and C. Gorter, 1988, ‘Stimulating Innovation in Indonesia Small Scale Industry: A Case Study’, Paper presented at the Seminar on Rural Non-Farm Activities in Indonesia, 15 January, Amsterdam: Free University of Amsterdam.

    Google Scholar 

  • Sandee, H., 1988, ‘Industry in Boyolali. Analyses at the Kabupaten and Kecamatan Level’, paper presented at the Seminar on Rural Non-Farm Activities in Indonesia, 15 January, Amsterdam: free University of Amsterdam.

    Google Scholar 

  • Sandee, H., and E. Heinen, 1988, ‘Caught in a Trap. Rural Tiles Production in Boyolali, Central Java’, paper presented at the Seminar on Rural Non Farm Activities in Indonesia, 15 January, Amsterdam: Free University of Amsterdam.

    Google Scholar 

  • Sandee, H., and H. Weijland, 1989, ‘Rural Cottage Industry in Transition: The Roof Tile Industry in Kabupaten Boyolali, Central Java’, Bulletin of Indonesian Economic Studies 25(2), 79–99.

    Google Scholar 

  • Sjahrir, K., 1985, ‘Sektor Informal: Beberapa Catatan Kritis’, PRISMA, The Indonesian Indication 14(6), 74–84.

    Google Scholar 

  • Smyth, I., 1988, ‘Differentiation Among Petty Commodity Producers: The Effects of a Development Project on Handicrafts Production in a Sundanese Village (West Java-Indonesia)’, Working Paper General Series (40), Institute of Social Studies.

  • Smyth, I., 1990, ‘Agglomeration of Small Scale Industries in Developing Countries: A Case Study of the Indonesian Rattan Industries’, Paper presented at the Research Seminars, Rural Development Studies, 10 January, Institute of Social Studies, The Hague.

  • Soentoro, 1984, ‘Penyerapan Tenaga Kerja Di Luar Sector Pertanian di Pedesaan (Labour Absorption in Non-Agricultural Activities)’, in F. KasKyno (ed.), Prospek Pembangunan Ekonomi Pedesaan Indonesia, 202–262, Jakarta: Obor.

    Google Scholar 

  • Staley, E. and R. Morse, 1965, Modern Small Industry for Developing Countries, New York.

  • Stewart, F., and G. Ranis, 1989, ‘Macro-Policies for Appropriate Technology: A Synthensis of Findings’, paper presented at the Conference on Policy Approaches Toward Technology and Small Enterprise Development, June 5–7, Institute of Social Studies.

  • Tambunan, T., 1989, Some Aspects of Financing Small Scale Industries in Developing Countries. A Cross-Section Study, December, Rotterdam: Erasmus University Rotterdam.

    Google Scholar 

  • Timer, P. C., 1975, ‘The Choice of Technique in Indonesia’, in P. Timer (ed.), The Choice of Technology in Developing Countries: Some Cautionary Tales, Cambridge: Harvard University.

    Google Scholar 

  • Van Dijk, M. P., 1982, ‘Some Impressions of the Informal Sector of Salatiga’, Collaboration Series (2), Salatiga: Satya Wacana Christian University.

    Google Scholar 

  • Van Dijk, M. P., 1987, Developing Off-Farm Employment in the Konto River Project Area, Project Communication Series (4), November, Jakarta.

  • Weijland, H., 1987, ‘Rural Industry. Sign of Poverty or Progress? Outline for Research in Rural Industry’, Collaboration series (6), Fakultas Ekonomi, Salatiga: Universitas Kristen Satya Wacana.

    Google Scholar 

  • Weijland, H., 1989, ‘Rural Industrialization: Factor Fiction?’, Faculty of Economics, Free University, Amsterdam.

    Google Scholar 

  • White, B., 1976, ‘Population, Involution and Employment in Rural Java’, Development and Change 7(3), 267–90.

    Google Scholar 

  • Wong, S. T., 1984, ‘Comparison of the Economic Impacts of Six Growth Centres on Their Surrounding Rural Areas in Asia’, Environment and Planning 16(1), 81–94.

    Google Scholar 

  • World Bank, 1979, Indonesia: Cottage and Small Industry in the National Economy, Report No. 2490-IND., Vol. 1: The Main Report, November 9, Washington, D.C.: The World Bank.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Center for Development Planning, Erasmus University, Burgemeester Oudlaan 50, Rotterdam, The Netherlands

    T. Tambunan

Authors
  1. T. Tambunan
    View author publications

    You can also search for this author in PubMed Google Scholar

Rights and permissions

Reprints and permissions

About this article

Cite this article

Tambunan, T. The role of small firms in Indonesia. Small Bus Econ 4, 59–77 (1992). https://doi.org/10.1007/BF00402216

Download citation

  • Accepted:

  • Issue Date:

  • DOI: https://doi.org/10.1007/BF00402216

Keywords

Search

Navigation