Systems of enterprises : a study of small-scale garment and wood furniture enterprises in Jakarta

Abstract

Indonesia’s labour force is expected to expand rapidly and urbanise between 1995 and 2025. Much of the urban workforce continues to be engaged in small-scale economic activity. In contrast to popular opinion, the growth of employment in small-scale enterprises during the 1980s and early 1990s compared favourably with that of large and medium-sized enterprises. Several explanations have been suggested, but, none have been fully investigated. Thus, this thesis has examined why small-scale enterprises have performed so well. Looking ahead, it also has considered what future contribution small-scale enterprises could make. In investigating these two issues the thesis reviewed the appropriate industrial development literature and derived a conceptual framework for examining systems of enterprises. The framework emphasised both the intra-firm relationships of small-scale enterprise and their inter-firm linkages. Enterprises were put into their specific historical, place and industry context by interviewing a large number of small-scale garment and wood furniture entrepreneurs and their workers in three specific locations of Jakarta. The analysis of the fieldwork data derived from Jakarta’s small-scale garment and wood furniture enterprises highlighted the family’s dual function: it served as both a social structure and an institutional organisation. This dual function was crucial to the flexibility and success of small-scale enterprises. In particular, small family businesses had different factor inputs of land, labour and capital than large corporations. This resulted in small and large enterprises having different product and spatial markets. Despite government initiatives to promote inter-firm linkages between small and large enterprises these efforts had not been significant in Jakarta’s small-scale garment and wood furniture enterprises. Clustering of small enterprises in specific locations, however, had been important. Their significance stemmed from the indirect benefits derived from their close proximity to each other rather than from the formal linkages between individual business enterprises. Both Jakarta’s small-scale garment and wood furniture enterprises offered wages comparable or higher than those of their large scale counterparts. Recruitment to these industries was likely to continue to be through informal networks, and characterised by high labour turnover and low job security. These case studies did not represent a system of flexible specialisation nor did the small firms fit neatly into the informal/formal sector dichotomy. Rather the conceptual framework used in this thesis, emphasises the importance of studying systems of enterprises comprising a continuum of firm sizes and focusing on intra- and interfirm relationships.