Inter-Firm Linkages, Business Strategies, And Performance Of Micro And Small Enterprises (Coretan Diskusi ISEFID)

 

In this time, the ISEFID’s discussion is very interesting because the presentation delivered in several languages namely Indonesia and English but with a dialect of Java. themes talking about microeconomics were  also very interesting, slightly different from the previous themes that tend to discuss macroeconomics. Do you want to know what the discussion is? Be patient brother, We will tell you what Mr Arif Hoetoro presented. He talked about Inter-Firm Linkages, Business Strategies, and Performance of Micro and Small Enterprises:
a Case Study of Micro and Small Industrial Clusters in the Province of Central Java, Indonesia

This study will go further in examining a comprehensive model of the relationships between inter-firm linkages, business strategies, and MSEs performance. This is expected to provide better understanding on MSEs development  especially those operate in small industrial clusters in the province of Central Java, Indonesia. This research is very significant because it presents a comprehensive picture on how MSEs apply internal strategies (i.e. business strategies) and external cooperation (i.e. inter-firm linkages) for their performance enhancement simultaneously. This to some extent will be useful for theoretical building of business practices in MSEs’ setting.

Firstly, what we have to know is the Case Study of Micro and Small Industrial Clusters in the Province of Central Java. MSEs in the province of Central Java tend to operate within inter-firm linkage mechanism, especially in clusters, as proved by several researches (Weijland, 1999; Sato, 2000b; Kuncoro, 2002; Posthuma, 2003; Tambunan, 2005; Irawati, 2007; Roda et al., 2007; Ismalina, 2009). The province of Central Java is well-known to have the largest number of MSEs clusters either in manufacturing or agro-processing sector (Weijland, 1999; Burger et al., 2001; Kuncoro, 2002; Marijan, 2005). Administratively, those clusters are divided into three groups namely: agriculture clusters located in 10 regencies, industry clusters spread across 18 regencies and tourism clusters dispersed across 7 regencies (Suryono, 2008).

Furthermore, what is his finding? Based on research methodology that Mr Arif used and also Field survey conducted during August 2009–January 2010, he finds that Inter-firm linkages negatively and significantly related to firm performance because of following reason: Limited cooperation, Lack of trust, Opportunistic behavior, Socio-cultural factors. However, Business strategies positively and significantly related to firm performance. He also said that Inter-firm linkages and business strategies are more interconnected in large cluster than in small ones. Business strategies play as moderator variable for the relationship between inter-firm linkages and firm performance. It as a representation of competition is imperative for small industrial cluster development.

In Conclution, Mr Arif said that MSEs in clusters are characterized by cooperation as well as competition which is expressed by inter-firm linkages and business strategies applied simultaneously. In general inter-firm linkages do not have association with  performance of MSEs. Business strategies significantly have relationship with  performance. Interconnection between inter-firm linkages and business strategies applied simultaneously by MSEs in different cluster size is more strengthened in large clusters than in small ones. Business strategies significantly moderate the relationship between inter-firm linkages and performance of MSEs. Problems emerge in the linkages either technically or socially lead co-located firms to reap benefits of the linkages ineffectively.

Lastly, Mr Arif give a few of recomendations. He said that to obtain advantages of clustering i.e. collective efficiency, MSEs operate in small industrial clusters in Central Java should develop effective cooperation in their inter-firm linkages. More over, Social cleavages appearing in a lack of trust and social cohesion should be eliminated so as to the advantages of proximity in clusters can be gained. The supporting programs for MSEs development operate in the clusters need an improvement. The programs should pay more attention on the efforts to raise the ability of MSEs in constructing close inter-cooperation among the clustered MSEs and also should facilitate an environment to stimulate fair competition for MSEs to grow as fair competition can strengthen MSEs’ competitiveness.

Irfan Soleh, 12 Februari 2011