Enhancing Entrepreneurial Activity through Entrepreneurial Education The Development of a Sustainable Entrepreneurial Ecosystem for Indonesia
“We need 4 million entrepreneurs.”
-‐ Dr. Gusti Muhammad Hatta, Indonesian Minister of Research and Technology
Masterthesis:
Student: Final version Imre Scheffers Studentnumber: 10208097 Thesis course:
Institution MSc in Business Administration -‐ Entrepreneurship & Innovation track University of Amsterdam; Amsterdam Business School Supervisor: Dr. R. C. W. Van der Voort
2nd Supervisor: Mr. L. Zhao MSc Word count:
Statement of originality
This document is written by Student Imre Scheffers who declares to take full responsibility for the contents of this document. I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it. The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
Abstract
The purpose of this study was to form an advice for the development of an entrepreneurial ecosystem of Indonesia. Which could aid in economic growth and a rise in employment opportunities. Currently, Indonesia lacks entrepreneurs despite the large amount of self-‐ employed individuals. This study therefore attempts to form an advice for the development of a sustainable entrepreneurial ecosystem where entrepreneurs are offered an environment where they are more likely to thrive. Coming from the literature review it was found that entrepreneurial culture and entrepreneurial education and training were the most eligible for development in Indonesia. Where the development of entrepreneurial education and training showed to offer best potential for development. Following this outcome, three entrepreneurial factors were formed that could be induced through entrepreneurial education. These factors were tested, through a quantitative data research with 64 Indonesian respondents, on the relationship with entrepreneurial activity. Entrepreneurial activity was operationalized through the comparison with two types of Indonesian entrepreneurs. These two types represented actual Indonesian entrepreneurs and Indonesian survival entrepreneurs, where the Indonesian entrepreneur represented entrepreneurial activity. The results showed that entrepreneurial experiences are positively related to entrepreneurial activity in Indonesia. While entrepreneurial intention and entrepreneurial mindset showed not to be related to entrepreneurial activity. The implications of this finding are discussed.
Keywords: Entrepreneurial ecosystem; Indonesia; Education; Entrepreneurial activity
Table of content
1. Introduction 5
2. Literature Review 8
2.1 What is an entrepreneurial ecosystem? 8
2.1.1 What is an entrepreneur? 8
2.1.2 The entrepreneurial ecosystem 10
2.1.3 Pillars of an entrepreneurial ecosystem 12
3. Indonesia 15
3.1 The three actors of an entrepreneurial ecosystem in Indonesia 15
3.1.1 Government 15
3.1.2 Entrepreneurs 18
3.1.3 Private Sector 20
3.2 Result of preliminary analysis 22
4. Entrepreneurial Education 26
4.1 Enhancing the entrepreneurial ecosystem through education 26
4.1.1 Rise of entrepreneurial education 26
4.2 Entrepreneurial education levels 27
4.2.1 Entrepreneurial universities 27
4.2.2 Entrepreneurship education on elementary and high school 29
4.3 Potential factors for the development of the curriculum 32
4.3.1 Entrepreneurial intention 33
4.3.2 Mindset 35
4.3.3 Experience 37
4.4 Practical testing of analysis and hypotheses 39
4.5 Expectancies 40
5. Methodology 41
5.1 Sample 42
5.2 Operationalization 42
5.3 Data collection procedure 46
5.4 Statistical procedure 48 6. Results 51 6.1 Reliability analysis 51 6.2 Hypotheses testing 54 6.3 Exploratory analyses 56 7. Discussion 57 7.1 Theoretical implications 57
7.2 Advice for the development of entrepreneurial education 62
7.3 Limitations 67
7.4 Future research 69
Acknowledgements 72
8. References 73
9. Appendices 85
Appendix 1. Impression of the sample of Indonesian survival entrepreneurs 85
Appendix 2. Impression of the sample of Indonesian entrepreneurs 87
List of tables and figures
Tables
Table 1 Means, Standard Deviation, Correlations and Reliabilities 53 Table 2 Means and Standard Deviations of the Demographic Variables for
both Types of Entrepreneurs
53
Table 3 Chi-‐Square Test of Independence of Entrepreneurial Experience 56
Figures
Figure 1 Pillars of entrepreneurial ecosystem 14
Figure 2 Hypotheses model 41
Figure 3 Motor repair shop; Bogor, Indonesia. 85
Figure 4 Tempeh bakery; Depok, Indonesia. 86
Figure 5 Tailor; Parung, Indonesia. 86
Figure 6 Indonesian Entrepreneurs at Coworkinc. in Jakarta, Indonesia. 87
1.
I
NTRODUCTIONIndonesia, a country which recently celebrated its 70th year of independence, is a rapidly growing country. Currently, the country is even a member of the coalition of the biggest economy driving countries in the world, the G20. Which is justifiable, when you take their grand population and an annual GDP growth, between 5 and 7%, into consideration (World Bank). Therefore, Indonesia seems to be a country with a real prosperous future. But unfortunately, this growth rate is not related to a rise in job opportunities (World Bank). In order to impede a future economic stagnation, while also aiming to grow the amount of job opportunities, Indonesia needs to undertake some actions. One of the propositions for stimulating this growth is through enhancing entrepreneurial activity in Indonesia. Which was found to be able to stimulate both the economy as well as the amount of jobs within a country (Feld, 2012). The Indonesian government seems to have taken this perspective, as can be seen by a statement from the Indonesian minister of Research and Technology, Dr. Gusti Mohamed Hatta: “We need four million entrepreneurs.” (Frazier, 2012). Which represents the call of Indonesia for an environment that enables the Indonesian population to become an, successful, entrepreneur.
This type of environment has been labeled as an entrepreneurial ecosystem, which contains all factors that can stimulate, as well as prohibit, entrepreneurial activity (Isenberg, 2010). A strong entrepreneurial ecosystem can offer a prosperous environment for
entrepreneurial activity. However, in order to establish certain strong environments several requirements have to be met. Firstly, an entrepreneurial ecosystem consists of several antecedents that simultaneously can lead to a fruitful environment. These antecedents are supported by the three main actors of an entrepreneurial ecosystem, namely the
develop a suitable entrepreneurial ecosystem, all three actors need to work simultaneously to utilize all these antecedents. The formation of an entrepreneurial is however a difficult process (Autio, Kenney, Mustar, Siegel & Wright, 2014). Which leads to the research question of this study; How to develop a sustainable entrepreneurial ecosystem in Indonesia?
Social relevance The outcome of this study could offer a great insight in how
Indonesia might be able to enhance the environment for entrepreneurs to thrive in. Through this insight, several actors within this environment can be made aware of what kind of adjustments could aid in the development of a more prosperous ecosystem. This could be beneficial for potential Indonesian entrepreneurs, since they would have more opportunities to thrive. While the fostering of an entrepreneurial ecosystem, where entrepreneurs could thrive, should also lead to a growth of employment possibilities (Van Praag & Versloot, 2007). Which would be caused by an increase in the ability of individuals to forge their own sustainable jobs, as entrepreneurs. The creation and growth of these ventures shall
eventually also require new personnel which offers several job opportunities (Audretsch & Thurik, 2000). Therefore, it seems viable to empirically analyze the environment for
potential entrepreneurs. And by doing so, form an advice to develop the current and future situation of Indonesia, through the start of the development of a sustainable entrepreneurial ecosystem.
Academic relevance Besides the direct influence this study could have on the development of Indonesia, this study could also offer several academic insights. One of these contributions is the analysis of the pillars of an entrepreneurial ecosystem in a developing Asian country. Which could show to be an added value for the analysis of other Asian or even in general developing countries. Thereby offering insights for future
entrepreneurial ecosystem analysis. Another contribution is that following this analysis an advice will be formed, which is aimed at the development of a sustainable entrepreneurial ecosystem. This approach differs from other studies, that exclusively study the
entrepreneurial ecosystem (e.g. Stam, 2014). This research could therefore offer insights for the development of an entrepreneurial ecosystem following an analysis. Therefore, this research aims to offer an overarching analysis with a solution based on the analysis and an accordingly study.
2.
L
ITERATURER
EVIEW2.1 What is an entrepreneurial ecosystem?
In order to analyze the current state of the entrepreneurial ecosystem of Indonesia, it is firstly important to highlight the definition and demarcation of an entrepreneur. Which will be followed by an outline of the entrepreneurial ecosystem.
2.1.1 What is an entrepreneur?
Entrepreneurship is a concept that is hard to actually grasp. There have been made several attempts in order to create an overarching definition. Conceptually, the entrepreneurial process involves opportunity identification and exploitation (Shane & Venkataraman 2000). A definition, however, that can be ascribed as a covering one is coming from Schumpeter (1912); entrepreneurship is the act act of creating new combinations that ends economic order and clears the way for a new one. This definition of entrepreneurship marks the importance of creating something new and therefore innovative. This innovative part can be traced back in the offering of a new service or product, as well as in the way it has been produced by an entrepreneur. As long as the outcome or process can be ascribed as a new combination, which could be traced back both in the creation of a new kind of offering as well as a new way of producing an existing offering (Knudsen & Swedberg, 2009). Both ways of a new combination could impact future entrepreneurial endeavors, since new
combinations open up leverage opportunities for other entrepreneurs (Acs, Braunerhjelm, Audretsch, & Carlsson, 2009). In that way, just one entrepreneurial activity can induce the creation of several new entrepreneurial ventures within the near future.
Above the production of new combinations within ventures, another demarcation can also be added to describe an entrepreneur, namely the difference between economy
driving entrepreneurship and non-‐economy driving entrepreneurship (Cooper & Artz, 1995). Where economy driving entrepreneurship can best be described as starting a new venture which creates value for the community, by unlocking new combinations and resources (Knudsen & Swedberg, 2009). While, on the other hand there is the possibility of opening a small or medium business, which is not driven by an orientation of growth and innovation. These kinds of founders are mainly aiming at making a profit for themselves, most often with an already existing concept that is not new for its surrounding. These venture do not comprise of any new combinations, and therefore they will most probably not lead to innovation. Therefore, it is unlikely that the community can benefit from their actions, since they are not likely to offer new insights or resources for potential future endeavors for prospective entrepreneurs. While these kind of ventures also have low odds of stimulating the economy (Henrekson & Sanandaji, 2014; Stam, 2013). In this study individuals who follow the economy driving entrepreneurship perspective and who came up with new combinations will be classified as “entrepreneurs”. While people who are taking the non-‐ economy driving entrepreneurship perspective, while also not bringing up new
combinations, will be classified as “survival entrepreneurs”.
By accounting survival entrepreneurial activities as entrepreneurship, a country might look very developing and prosperous but this will eventually not be reflected in an economical growth. Since these type of ventures do not really contribute to economic prosperity (Feld, 2012). Entrepreneurial activity however, can lead to positive results for the whole community (Acs et al., 2009). Since this type activity produces outcomes that offers new insights, as well as new opportunities. And the recognition and taking advantage of opportunities is one of the main aspects of entrepreneurship (Eckhardt & Shane, 2003). This distinction between the two types of entrepreneurs can be highlighted even further through
the given distinct definitions by Carland, Hoy, Boulton and Carland (1984) of small business ventures (by survival entrepreneurs) and entrepreneurial ventures (by entrepreneurs): “A small business venture is any business that is independently owned and operated, not dominant in its field, and does not engage in any new marketing or innovative practices.”; while entrepreneurial ventures are defined as: “One that engages in the principal goals of an entrepreneurial venture; profitability and growth, and the business is characterized by innovative strategic practices.”. This distinction will be a major topic of discussion in this paper, since it could show an important insight in the current situation of an entrepreneurial environment in Indonesia. Following the outline of the description and demarcation of entrepreneurship, the next paragraph will give an overview of entrepreneurial ecosystems.
2.1.2 The entrepreneurial ecosystem
An entrepreneur is often influenced by its environment, more specifically the
entrepreneurial environment. This environment is known as an entrepreneurial ecosystem, and can be described as an environment which offers interacting conditions where new entrepreneurial activities are likely to thrive (Isenberg, 2014). These conditions are carried out through the interplay between three different actors; the government, the entrepreneur and the private sector (Isenberg, 2010). The government can influence the entrepreneurial ecosystem through its regulatory role and can therefore provide crucial legitimacy for supporting entrepreneurship. While the entrepreneurs, individuals, aid in the building of skills, opening up resources and developing employability opportunities and thereby experiences. While the third actor, the private sector, provides opportunities that can be further explored as well as offering skills and resources for entrepreneurs. In a strong entrepreneurial ecosystem these three actors should interact in such a way that
entrepreneurial activity is encouraged and enables potential entrepreneurs to thrive. Therefore, the interplay between the three actors could have a major impact on the growth of a country, city or even university.
Above these three actors, the geographical location could also play an important part in the effectiveness of an entrepreneurial ecosystem. Since, it was found that several factors of a geographical location impact the effectiveness of an entrepreneurial ecosystem (Stam & Bosma, 2015). The first, and perhaps most logical factors that causes a specific location to impact entrepreneurship is due to the local culture. As mentioned before, entrepreneurship consists of acting upon an opportunity and the probability of this action is likely to be influenced by the local culture (Stam & Bosma, 2015). In order to recognize and act upon these entrepreneurial opportunities, a person needs to have a positive mindset towards risks (Shane, 2000). The local culture can play an important part in acquiring certain perspectives, for example through the observation of others (Zander, 2004). Therefore, it can be stated that the dominant culture can form the amount of entrepreneurial activity within a country. Urbanization is another locational factor that could influence the likelihood of entrepreneurial activity. Since, urban areas offer big advantages for entrepreneurship, for example a bigger exposure to knowledge, social connections and serendipitous encounters (Glaeser, 1999). The lack of urban areas could therefore affect the strength of an
entrepreneurial ecosystem. Another locational factor that could affect the entrepreneurial ecosystem is the type of regional formal institutions. An example of potential interference coming from the formal institutional factor is a non-‐compete agreement, which prohibits former employees to start a new venture which is build on their knowledge of a certain sector. Certain agreements limit the proximity of the creation of innovative start-‐ups, since former employees cannot leverage their knowledge of the sector (Samila & Sorenson, 2011).
2.1.3 Pillars of an entrepreneurial ecosystem
Within an entrepreneurial ecosystem there are several factors that together determine the strength. In order to analyze the current state of the entrepreneurial ecosystem of Indonesia there is a need for a set of pillars that can benchmark the state of factors of an
entrepreneurial ecosystem. Several academic studies tried to grasp these dimensions, which have led to somewhat different perspectives on the best way to analyze an entrepreneurial ecosystem. These perspectives came forward in the forms of dimensions, factors and pillars. One of these perspectives was brought forward by Isenberg (2010). Who stated that an entrepreneurial ecosystem consists of six overarching dimensions: conducive culture, enabling policies and leadership, availability of appropriate finance, quality human capital, venture-‐friendly markets for products, and a range of institutional and infrastructural support. These six dimensions came forward as overarching categories of 100 specific elements that could exist in an entrepreneurial ecosystem. Therefore, these six dimensions seem to represent the most vital parts of an entrepreneurial ecosystem. However, in order to justify the chosen pillars for this study, two other perspectives are reviewed and
compared as well.
Another proposition to benchmark an entrepreneurial ecosystem came forward in the representation of factors. Suresh and Ramraj (2012) proposed eight factors that should be present, either in a low or high extent, within an entrepreneurial ecosystem. These are represented by moral, financial, technology, market, social, network, government and environmental support factors. Where each factor could cumulatively strengthen the entrepreneurial environment. These factors show a strong convergence with the six dimensions, proposed by Isenberg (2010), for example financial support factors (Suresh & Ramraj, 2012) and availability of appropriate finance (Isenberg, 2010).
The last set pillars that are considered for the measurement of the entrepreneurial ecosystem are coming from the entrepreneurship barometer. Which was formed for a grand analysis by Ernest & Young (EY) to benchmark the entrepreneurial ecosystem of all members of the G20. After the analysis of several ecosystems, these pillars seemed to offer a good insight in the state of several countries their entrepreneurial ecosystem. The pillars that were formed are access to funding, entrepreneurship culture, tax & regulation, education & training, and coordinated support. Again, these pillars showed a quite strong convergence with the earlier mentioned dimensions and factors.
All these benchmarks underline the notion that the ‘heroic entrepreneur’ is not the sole determinant of entrepreneurial success, since the environment also plays an important role (Autio & Thomas, 2013). The pillars that were formed by EY, showed a strong
convergence with the other proposed factors and dimensions. While the proposed pillars are also somewhat more practical and aimed at analyses. Another benefit of these pillars is the fact that they were already subject of a diverse validation, coming from the analysis of several entrepreneurial environments (including Indonesia). Concluding, these pillars seem to offer the best potential of valid analysis of the entrepreneurial ecosystem of Indonesia. Therefore, these pillars will be used as the basis for the formation of the analysis
benchmarks for this study. In order to cover all the important parts of the other benchmarks of the entrepreneurial ecosystem, some of these pillars will be adjusted in minimal way. These changes are build upon the findings of the other studies, which should create a set of overarching benchmark tools for the analysis of the entrepreneurial ecosystem of Indonesia, see Figure 1. The first pillar that will be used is entrepreneurial culture. This concept can be explained as societal norms concerning entrepreneurship (e.g. like tolerance of risks and innovativeness) as well as success stories within the environment. The second pillar will be
access to funding, which describes the ease for people to get the right amount of funds for entrepreneurial ventures. The third pillar that will be used is enabling policies and
leadership, which describes the legislations and opportunities that entrepreneurs have in their environment. The fourth pillar contains education and training, which looks at the amount of possibilities and the level of entrepreneurial education and training there is available for (potential) entrepreneurs. The last pillar that will be used is support for entrepreneurship. This pillar describes until what extend entrepreneurs are receiving and experiencing support from infrastructure (e.g. telecommunication), different professions (e.g. good lawyers) and non-‐governments institutions (e.g. business plan contest).
Figure 1. Pillars of entrepreneurial ecosystem Entrepreneurial culture
Access to funding
Enabling policies and leadership Education and training
Support for entrepreneurship
3.
I
NDONESIA3.1 The three actors of an entrepreneurial ecosystem in Indonesia
As mentioned earlier, a good entrepreneurial ecosystem is depended on a proper interplay between three actors. Which means that all the actors should fulfill their part in order to create a fruitful environment. Solely one efficient operating actor would most probably be insufficient to support the entrepreneurial ecosystem and eventually entrepreneurial
activity. Therefore, the three actors of an entrepreneurial ecosystem will be reviewed within the Indonesian context, in order to analyze their part in entrepreneurial activity within Indonesia. Through this analysis, the state of the entrepreneurial ecosystem will be analyzed. Which would reveal the pillars that could benefit the most from developmental actions.
3.1.1 Government
In the words of the Indonesian minister of research and technology Dr. Gusti Muhammed Hatta; “Entrepreneurship can be the key to boost the economy and the employment rate.”. Which underlines the mindset of the Indonesian government, who stated that they are wiling to invest in the development of entrepreneurship in Indonesia (Frazier, 2012). This initiative has already been put into practice, with at least 388 government initiated SME assistance programs in 2003 (SMERU, 2004). An example of these programs can be given through two initiatives from the government, that aimed to improve the entrepreneurial environment: the Permodalan Nasional Madani ("Permodalan Nasional Madani," 2016) and the Baitulmaal Muamalat programs ("Baitulmaal Muamalat" 2014). These programs are aimed at providing entrepreneurs small loans, giving assistance in access to other finance opportunities, providing business training and aid in the formation of communities for
entrepreneurs to act in (Murphy, 2010). These type of programs are one the tools of the Indonesian government to create a better environment for entrepreneurs.
The initiative and implementation seems to already have taken a good form to enhance entrepreneurship. Several studies have tried to analyze the effect of the efforts of the Indonesian government on improving entrepreneurship. Tambunan (2008a), for example found that that government expenditures have a positive impact on the growth of SME’s in Indonesia. Especially the financed programs that were aimed on developing SME’s showed to have a positive impact on the success of small and medium enterprises. A critical note however can be placed on the aim of the expenditure towards SME’s. Since the government of Indonesia is aiming to induce actual entrepreneurial activity (growth and innovation oriented), there should be a more specific focus on the ventures that are actually following this path (Tambunan, 2007). By mainly aiding these survival entrepreneurial venture, the impact of the governmental effort to stimulate entrepreneurship will stay rather low, since aiding survival entrepreneurial ventures will most probably not stimulate the economy and the creation entrepreneurial ventures (Henrekson & Sanandaji, 2014; Stam, 2013). This can be supported for the Indonesian context with the finding that the impact of the Indonesian government relies on the behavior of the entrepreneurs (Rante & Warokka, 2013). Which underlines the importance of the interplay between the three actors. Where solely making sources available by the government does not directly lead entrepreneurial activity. Since there it dependents if the entrepreneur acts upon these entrepreneurial opportunities.
Another factor that could alternatively explain the differential influence of the governmental entrepreneurship programs is the Indonesian culture (Rante & Warokka, 2013). Where the Indonesian culture, in general, is more or less averse against some important characteristics of entrepreneurial activity (Bhasin & Venkataramany, 2010), for
example through their preference to avoid risks (Hofstede, n.d.). Which could be detrimental to the efforts of the government. But according to Beugelsdijk (2007) it is possible to shift cultures more towards entrepreneurship. It is however an effortful endeavor, since cultures tend to be very persistent. The Indonesian government already seems to be aware of this point, since they introduced an entrepreneurial curriculum for high schools. Which, according to a study by Bhasin (2007), could be beneficial in order to change the mindset more towards entrepreneurship. The implementation of
entrepreneurial education in Indonesia will be highlighted in depth later in this paper. Another challenge in the anticipated impact of the assistance programs is the fairly recent democratic decentralization. The dispersion of governmental responsibilities went rather quick, which caused several inefficient policy applications (Von Luebke, 2009). However, eventually several local governments showed to be able to put their mark on the entrepreneurial development in a variety of regions. While the Indonesian economy stayed stable through these decentralization challenges (Bhasin & Venkataramany, 2010). An important notation is however that the biggest part, 71%, of the assistance programs were present on just two islands, Java and Bali (SMERU, 2004). Even though these islands
represent a large part of the population (59%) this dispersion could cause unequal opportunities for the Indonesian population ("World Population Review" 2016).
Taking al these findings together, the Indonesian government shows to exert quite some effort to create a prosperous environment for entrepreneurs. With several programs that are aimed at the aid of financial access, education and training and the creation of support communities for entrepreneurs. However, there are some crucial points that could be better developed, in order to create a sustainable entrepreneurial ecosystem. One of
these points is the behavior and activity of the entrepreneurs in Indonesia on the implemented changes. Which will be discussed in the next paragraph.
3.1.2 Entrepreneurs
Currently “entrepreneurship” takes a relatively large place in the welfare of the country, with self-‐employed ventures being responsible for 57% of the GDP in 2012 (Bellefleur, Murad & Tangkau, 2012). This can be traced back to the statistic that 90% of the
employment is within the self-‐employed businesses (Tambunan, 2007). These businesses are represented mostly by a very large number of micro enterprises which are essentially run by self-‐employed individuals (or together with core family members). Spread throughout all of Indonesia, including the rural hinterland. The majority of these ventures are solely aimed at producing sufficient financial returns to accommodate basic living expenses, like
consumption and housing (Gunawan, 2014; Tambunan, 2007). And are therefore most of the times low in productivity, poorly run with minimal capital and working with inferior
technology and cheap products (Tambunan, 2007). These ventures can therefore be classified as survival entrepreneurial ventures, since the aim of these ventures are not growth or innovation oriented. This phenomenon seems to be similar to the Dutch
entrepreneurship paradox (Stam, 2014), where the increase of the amount of new ventures was not related to a rise in innovation. According to Stam, the rise of self-‐employed ventures can be explained as a result of the economic recession, where self-‐employment served as last resort to earn a salary. In order to stimulate entrepreneurial activity, Stam stated that prospective entrepreneurs should be enabled to undertake entrepreneurial activity.
Above the description of the founders of micro enterprises, some studies tried to classify the entrepreneurs in Indonesia based on academic research. One of these studies
was conducted by Gunawan (2014), who tried to classify the Indonesian survival entrepreneurs. The findings are quite remarkable, since the majority of the Indonesian “entrepreneurs” classified themselves as sustainable entrepreneurs. With profit, the
wellbeing of the planet and people as core values of their ventures. However, based on field observation of actual day-‐to-‐day business behavior, of these respondents, it seems like they were more concerned with economic profits than putting attention towards being socially and environmental responsible. This observational finding can be supported with the finding of Tambunan (2008a) that the main reason for starting a venture in Indonesia was income and consumption related. Another often stated reason for the choice of starting a non-‐ innovative venture is the lack of an entrepreneurial mindset (Haynie, Shepher, Mosakowski & Earley, 2010). Which can be supported for the Indonesian context by the finding that Indonesian citizens are, in general, not eager to undertake entrepreneurial action (Bhasin & Venkataramany, 2010). This could partly be explained through the collectivistic culture, which causes Indonesian workers to accept a less pleasant work situation relatively quick. Eventually this will even lead to some kind of satisfaction with this work (Thomas & Pekerti, 2003).
Therefore, it seems like the pursuit of entrepreneurship has quite some pitfalls within Indonesia. Several studies therefore tried to find factors that actually stimulate citizens to undertake entrepreneurial action. One of these studies was conducted by Riyanti (2004), who found three factors that could affect the success of entrepreneurs in Indonesia. One of these factors is the amount of experience an entrepreneur has, which allows entrepreneurs to exploit more known potential sources of entrepreneurial success. Where experience could feed the self-‐esteem to pursue an entrepreneurial venture and the knowledge to be successful in this endeavor. The other factors that were found were entrepreneurial mindset
and previous involvement in managing a business. The influence of the entrepreneurial mindset on entrepreneurial activity receives therefore yet again support. It seems like the entrepreneurial mindset is one of the crucial lacking factors to explain the gap between the survival entrepreneurs and actual entrepreneurs. Above these factors, Indarti and
Langenberg (2004) found three other factors that can explain the differences between growth, stagnation and decline of different ventures in Indonesia. The factors that were found to be influencing successful Indonesian ventures were marketing, technology and capital access which all affected business success positively in a significant way. The first two seems to point towards earlier experiences (both practical as well as educational) which is accordingly to the earlier mentioned findings of entrepreneurial experience as an important factor of entrepreneurial activity in Indonesia.
In sum, the willingness to start a venture seems already evident within the
Indonesian population. The problem however seems to lay within the perception of starting an entrepreneurial venture as opposed to a survival entrepreneurial venture. Where
especially the culture seems to play a vital role, as well as the lack of some essential capabilities. In order to form a supported conclusion about the pillars, the next paragraph will discuss the last actor; the private sector.
3.1.3 Private Sector
The last actor of the entrepreneurial ecosystem is the private sector. Relatively, the private sector seems to account for a smaller share of the entrepreneurial programs, 129, than the government does (SMERU, 2004). However, on the verge of the absolute amount of
institutions, the private sector represents a significantly larger variety (51 as opposed to 13). They could therefore be of detrimental importance for the development of
entrepreneurship in Indonesia. Based on current examples, these institutions seem to be really helpful for the development of entrepreneurial activity. One perfect example is the global entrepreneurship program Indonesia (GEPI), an institution that offers a variety of entrepreneurship programs. The purpose of GEPI is to promote entrepreneurship as a key pillar of economic development within Indonesia. Through several programs that empower early stage start-‐ups with the facilitation of funding access, knowledge transfers and the building of networks. While they also advice the government, concerning the state of the policies and regulations that are entrepreneurship related. Another interesting activity is the celebration of the successes of start-‐ups, which could slowly push the mindset of
prospective entrepreneurs towards the positive outcomes of entrepreneurial activity. While a different striking example of support by the private sector is coming from one of the richest men of Indonesia, mister Ciputra (Frazier, 2012). Who founded a university
(University of Ciputra Entrepreneurship Center) to enable young ambitious Indonesians to learn the basic skills that are needed to start and run a new business (Frazier, 2012). He explained that he experienced that basic business education and management training was neglected in Indonesia for potential entrepreneurs (Frazier, 2012). Besides the university, he has also been reaching out to prospective entrepreneurs through the website;
Ayoentrepreneur.com, where prospective entrepreneurs as well as active entrepreneurs can meet all their needs. For example, for guidance, funding assistance and even educational purposes. Lastly, Ciputra facilitates entrepreneurship through several buildings that are occupied by entrepreneurial instances and therefore offer physical meeting points for entrepreneurs (Ciputra world Jakarta, n.d.).
“The entrepreneur recognizes an opportunity, adds innovation and takes a calculated risk in its execution.” – Dr. Ir. Ciputra
Both GEPI and the efforts of mister Ciputra can be considered as a NGO, while the entrepreneurial ecosystem of Indonesia is also influenced by the activities coming from multinational companies. A good example of this type of activity can be given by Unilever. Who are supporting entrepreneurial activity through specifically acquiring agriculture products from individual Indonesian farmers. And this action has a supposedly grand effect, since it was found that for every direct job within Unilever Indonesia, 90 additional
entrepreneurial ventures came to existence. Which exemplifies the impact that the corporate organizations can have in Indonesia (Clay, 2005).
Other examples of the private sector who aid entrepreneurship in Indonesia are co-‐ working spaces, which are growing fast. Within these places Indonesian entrepreneurs can independently work on their projects, while they are also able participate in collaborations with other entrepreneurs. Some of these co-‐working spaces also offer the possibility of aiding entrepreneurs in several ways. One outstanding example of such a facilitating space is Coworkinc. in Jakarta. Where entrepreneurs are aided in basically all their entrepreneurial needs (Coworkinc., 2015).
As can be seen through several examples, is that the private sector in Indonesia is currently trying to stimulate entrepreneurship in Indonesia. Where especially
entrepreneurial support strongly came forward in their endeavors. But in general almost all pillars seem to be represented in a relatively strong way. Which seems to indicate that the private sector plays an important part in the entrepreneurial environment of Indonesia.
3.2 Result of preliminary analysis
After reviewing all three actors, it seems evident that they are all exerting effort to create a blossoming environment for entrepreneurs in Indonesia. However, the overview did point
out several development opportunities in order to create a sustainable entrepreneurial ecosystem. Which seems to carry quite some importance since it was found that the outcome on the basis of entrepreneurial activity is not really positive. Which can mainly be identified through the large gap between the survival entrepreneur initiated ventures and the entrepreneurial ventures that came to existence in Indonesia. On the other hand, it can be stated that the high amount of self-‐employed ventures is quite remarkable. Which therefore seems to show a somewhat high willingness to start an own business. But in order to develop more active entrepreneurs within Indonesia some action should be undertaken. These actions should be aimed at narrowing the gap between survival entrepreneurial activity and entrepreneurial activity and by successfully doing so, stimulate economic as well as innovation growth. The overview revealed several developmental opportunities for narrowing this and thereby the start of the creation of a sustainable entrepreneurial ecosystem. These findings came forward out of the presence of the entrepreneurial ecosystem pillars. The most evident pillars seemed to be entrepreneurial culture and
entrepreneurial education and training. Where entrepreneurial education and training might not be directly highlighted, but the showcased lack of entrepreneurial capabilities and
experiences within the population showcase the need for proper entrepreneurial education and training. While entrepreneurial culture came forward multiple times as one of the cofounding factors of entrepreneurial activity in Indonesia.
Which however does not implicate that the other pillars are already at the right level. However, it can be stated that these pillars are already represented in quite an evolved manner and there already seem to be several kinds of evolvements in process. Which
currently seems to offer quite a great array of sources for entrepreneurs to leverage, as long as the willingness is there. Enhancing the other pillars would potentially aid some growth of
entrepreneurial activity in the short term, which is still uncertain due to large the the dispersion of entrepreneurial activity. However, the enhancement of access to funding, for example, would most probably only have an effect on one generation of citizens (since there is no unlimited financial stream). While, there are also quite some tools available for
potential entrepreneurs to leverage in their entrepreneurial endeavors, ranging from governmental programs to co-‐working spaces. Albeit not in the biggest availability, but the presences of these sources to gather the resources and support necessary. The development of the pillars entrepreneurial education and training and entrepreneurial culture might aid in this leveraging process, since there seems to be a gap in the amount of entrepreneurial capabilities and mindset. With more knowledge, prospective entrepreneurs should be easier able to leverage the sources that are available and grasp them in a more efficient way. While more competent prospective entrepreneurs could also offer more insight for further
development of the entrepreneurial ecosystem, as opposed to the current situation. Therefore, the development of entrepreneurial education and training and entrepreneurial culture could also offer a more future oriented solution. As already stated by Obschonka, Silbereisen and Schmitt-‐Rodermund (2010), bon their research, a lifespan development approach of entrepreneurship could aid the amount of entrepreneurs more than a short-‐ term solution. While it their findings also support the idea of promotion of
entrepreneurship at a young age. This perspective is perfectly portrayed in the following quote:
“Education is our passport to the future, for tomorrow belongs to the people who prepare it for today.” – Malcom X
Above the outcome from the overview of the actors in Indonesia, the call for development of entrepreneurial education and training and entrepreneurial culture was also found in the
study from Widjaja and Tan (2013). Who found in their entrepreneurial ecosystem analysis that Indonesian citizens rated these pillars as the lowest two. Therefore, it seems justified to aim at the development of the pillars of entrepreneurial education and training and
entrepreneurial culture.
The potential for improvement might, for a large part, be traced back to the
educational background of the Indonesian population. Where only 21% of the entrepreneurs have followed a tertiary education (Widjaja & Tan, 2013). This might limit Indonesian
entrepreneurs in the ability of gaining a different perspective of looking at situations, which has a prohibiting effect on recognizing opportunities. One of the explanations for this distribution can be found in the Indonesian culture, where the high levels of risk aversion justify not taking the risk of eventually profiting from an expensive education. However, entrepreneurship does not solely have to be learned during a university education, but could also be educated on other educational levels. Where one of the objectives seems to be to start a change towards a more entrepreneurial culture. Which come forward after the finding that the entrepreneurial mindset is could serve as on of the main explanations of the gap between entrepreneurs and survival entrepreneurs in Indonesia. The finding that the Indonesian culture seems to induce seeing a business failure as a “learning opportunity” (Widjaja & Tan, 2013) offers a potential prospect for the enhancement of the
entrepreneurial culture. While, it is assumed, in general opinion, that high levels of entrepreneurial activity and thereby entrepreneurial mindset can be reached through proper entrepreneurial education and training (Bhasin, 2007; Bilíc, Prka & Vidovic, 2011; European Commission 2006). Therefore, it seems like entrepreneurial education and training can aid the development of entrepreneurial activity in Indonesia. Especially since the other somewhat weak antecedent, namely lack of entrepreneurial experiences and capabilities,
can be stimulated through entrepreneurial education and training (Rasmussen & Sørheim, 2006). The next chapter shall therefore review several perspectives and options of
entrepreneurship education and training and these insights will be linked to the current progress of the Indonesian educational system. By doing so a proposition for enhancement could come forward.
4.
E
NTREPRENEURIALE
DUCATION4.1 Enhancing the entrepreneurial ecosystem through education
According to the preliminary analysis it seems like the pillars entrepreneurial education and training and entrepreneurial culture are most eligible for development. While it was found that improvement of entrepreneurial education and training could positively impact entrepreneurial culture. Building on this notion the development solutions for the improvement of entrepreneurial education and training in Indonesia seems to be able to induce durable entrepreneurial activity in Indonesia. This chapter will therefore overview the literature of entrepreneurial education, which in turn will lead to a proposed solution to enhance the Indonesian entrepreneurial ecosystem.
4.1.1 Rise of entrepreneurial education
The generation of the 21st century can be seen as the most entrepreneurial generation since the industrial revolution (Kuratko, 2005). Since this young generation accounts for the largest part of the rising entrepreneurial orientation, this has also affected the interest in entrepreneurial education. Which has led to an enormous rise of several types of education, for example within universities, that started to offer entrepreneurial courses (Katz, 2003). An
