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Development of rural manufacturing SME clusters in a developing country : The Indonesian case

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Frame of Image  in many other developing countries is clustering, where firms producing similar products concentrate in a certain area. This has led the Indonesian government to adopt a clustering approach as an important element in its rural development strategy to promote the development of rural industry, which consists mainly of SMEs. The main aim of this study is to identify critical success factors of development of rural manufacturing SME clusters in Indonesia. From a number of cases, it reveals that direct government supports are not the main successful factor, or the role is minimal. Instead, the most critical ones are strong inter-firms linkages in clusters and external networks between the clusters and institutions outside the clusters, especially large enterprises (LEs), through subcontracting and traders/trading companies in urban areas. Through such external linkages, firms in clusters secure their access to a wider market.
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Center for Industry and SME Studies, University of Trisakti, Indonesia
124 Journal of Rural Development 31(2)
I. Introduction
In Indonesia, manufacturing small and medium enterprises (SMEs), i.e. firms with 100 workers or less, have historically been the main player in domestic economic activities, especially as a large provider of employment opportunities, and hence a generator of primary or secondary source of income for many households. For low income or poor farm households in rural areas, these enterprises, especially the small ones, i.e. micro enter


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Title Development of rural manufacturing SME clusters in a developing country
Similar Titles
Sub Title

The Indonesian case

Material Type Reports
Author(English)

Tambunan, Tulus

Publisher

Korea Rural Economic Institute

Date 2008
Journal Title; Vol./Issue Journal of Rural Development:31/2
Pages 24
Subject Country Indonesia(Asia and Pacific)
South Korea(Asia and Pacific)
Language English
File Type Documents
Original Format pdf
Subject Industry and Technology < Manufacturing

Abstract

Development of manufacturing small and medium enterprises (SMEs) is a key engine to promote development of rural economy in developing countries. A common industrial organization among manufacturing SMEs, especially in rural areas, in Indonesia as in many other developing countries is clustering, where firms producing similar products concentrate in a certain area. This had led the Indonesian government to adopt a clustering approach as an important element in its rural development strategy to promote the development of rural industry, which consists mainly of SMEs. The main aim of this study is to identify critical success factors of development of rural manufacturing SME clusters in Indonesia. From number of cases, it reveals that direct government supports are not the main successful factor, or the role is minimal. (The rest omitted)