The 15th International Convention of the East Asian Economic Association in Cooperation with University of Padjadjaran Bandung, November 5-6, 2016 Convention Theme: Sustainable and Inclusive Development in Asia and the Global Economy Elvy Maria Manurung and Catharina Badra Nawangpalupi Parahyangan Catholic University 1
Enhancing Indonesian Creative Economy Through Entrepreneurship And Locality: Case Studies By Young Entrepreneurs In West Java. Elvy Maria Manurung Business Management Program of Diploma III, Economics Faculty Parahyangan Catholic University elvymaria@unpar.ac.id Catharina Badra Nawangpalupi Industrial Engineering Faculty Parahyangan Catholic University cnawangpalupi@gmail.com Abstract The role of young people in entrepreneurship proved to be increasing; they join in creating new jobs and boost the local economy. This research that was conducted from 2014 until present aimed to explore the challenges that became the factors, which both drive and inhibit creative young entrepreneurs. The study used both quantitative and qualitative methods and study four major cities in West Java Indonesia. By using survey and statistics, quantitative method was conducted in the first year. The results in the first year showed that the entrepreneurs in Garut, Cirebon, and Tasikmalaya possessed all of the unique characteristics, except networks which was owned by Bandung entrepreneurs. In addition, it was also known that the enthusiasm in the attitude of entrepreneurial ventures had different effects. Even though on average, the creative young entrepreneurs in the four cities had good business attitude, there were differences in their characteristics based on their locality or local culture. Entrepreneurship in the creative industries was indicated by unique characteristics in the materials and/or technologies, the right time to produce a product, social environment that supports the industry, aesthetics, funding sufficiency, conducive city climate, and the suitable networking. Furthermore, to obtain a comprehensive picture of the creative industries, especially the young entrepreneurs in West Java, the research is now conducted to further explore the barriers and boosters in industrial context qualitatively, through interviews and focus group discussion on several case studies. Keywords: creative economy, entrepreneurship, young entrepreneurs, locality.
1. Introduction Changes occurred in the third millennium when the economy condition of the society is based on knowledge known as knowledge-based society. Creativity today is being recognized as intangible resources that is absolutely needed. Richard Florida (2002) even dared to say that creativity is powerhouse for developing economy, even though the idea is still debatable. Previously, Howkins (2001) argued that new economy has emerged around creative industry which is being controlled by intellectual property laws such as patent, copyright, brand, royalty, and design. The development of creative industry for the last one century is indicated by the shift of understanding regarding cultural commodity, which is now enhanced by the development of technology and capitalized. Creative industry is defined as humans activities related to the production and consumption of goods and services related to cultural, artistic, and entertaining values. The activity emerges when people have new needs to find significance and experience when they use or consume goods or services. Creativity and innovation become important factors in creative industry in producing unique and meaningful goods and services (Connor J.O., 2010, Simatupang, T., 2010). In Indonesia, creative industry started to emerge in 2011 when the Ministry of Creative Economy and Tourism was established based on Presidential Regulation No. 92/2011. In January 2015, based on Presidential Regulation No. 6 of 2015, creative economy was abolished from the Ministry of Tourism and was established on one independent institution under Agency of Creative Economy (Badan Ekonomi Kreatif). According to the data, there had been an increase on the export of creative product and its contribution towards PDB, which increased to 8% in 2013 from 6.9% in 2012. The number is aimed to be increased to 10% in 2014, and 12% in 2019 (Ministry of Industry, 2014; Renstra Badan Ekonomi Kreatif, 2015-2019). There are six groups of creative industry in Indonesia according to the Ministry of Industry (2014), which are categorized into: 1. Publication and Presentation Industrial Group: Publishing, Printing, and Advertising 2. Industrial Group with Cultural Content and was delivered through Electronic Media: TV, Radio, Film, and Photography
3. Industrial Group with Cultural Content and was performed to Public: Music and Performance Arts 4. Industrial Group with Product of Cultural and Arts Content: Handcraft and Art Works 5. Design Industrial Group: Fashion and Architecture 6. Industrial Group with Technology Content: Research and Development, Information Technology, and Software Service The development of export growth came from Indonesia creative industry for the last decade (2002-2008) was presented in Table 1. Table 1 showed that fashion and handcrafting industry was on the first and second rank of the biggest export number of creative industry sector in Indonesia, including West Java. Table 1. The Development of Export Value of Indonesia Creative Industry in 2002-2008 (in million rupiahs) No Creative Industry Business Field 2002 2003 2004 2005 2006 2007 2008 Average 1 Architecture 89 245 210 57 236 67 112 145 2 Design 1.111.977 1.499.860 1.843.686 2.169.720 2.214.047 2.369.026 2.892.009 2.018.189 3 Fashion 36.269.926 35.261.898 45.563.824 51.042.260 54.714.623 57.908.311 71.695.510 50.350.90 7 4 Film, Video, 940 1.715 7.560 2.550 1.187 448 1.071 2.210 Photography 5 Software and -- -- -- -- -- -- -- -- Computing Service 6 Handcraft 20.108.107 19.608.197 21.741.500 22.673.162 27.292.605 34.351.715 39.673.977 25.282.94 5 7 Music 724.457 1.004.425 37.926 226 238 131 77.821 263.604 8 Artworks 38.104 43.170 38.665 60 78 82 108.409 32.653 9 Publishing and 103.754 90.136 93.734 180.506 161.140 133.652 173.350 133.753 Printing 10 Advertising 23.166 47.746 51.675 39.365 64.626 72 132.478 51.304 11 Interactive leisure 32.172 39.756 53.784 68.388 75.380 132.200 170.233 81.702 Software 12 Research and -- -- -- -- -- -- -- -- Development 13 Performance Arts -- -- -- -- -- -- -- -- 14 Television and -- -- -- -- -- -- -- -- Radio TOTAL 58.412.692 57.597.148 69.773.900 76.462.033 84.840.178 95.208.601 114.924.970 79.602.789 (Source: Nugroho, P.S. and Cahyadin, M., 2014) The research was based on the first study conducted in 2014-2015 that was carried out in four cities in West Java on two creative industry sectors with the biggest export number, which were fashion and handcrafting industry. The study spread 400 questionnaires and 388 data were collected and analyzed. The observed young entrepreneurs who lived in some cities that
represented West Java were from Bandung, Cirebon, Tasikmalaya, and Garut. As reported in Barlian, et al. (2015), survey showed that there were some factors building the creative process, as conceived by Moeran (2011), which were: (i) material and technique/technology they used, (ii) time to generate the products, (iii) place to make the product, (iv) social surrounding and people involved in the process, (v) held/recognized aesthetics or representational, and (vi) funding availability as economy limit. However, it was shown that Bandung was the only city in West Java that showed the importance of networking as indicated in the answer provided by the young entrepreneurs in the questionnaires, and it was not indicated in other observed cities. The research result of the first year also presented that each observe city in Bandung had some differences and uniqueness of their creative industry. 2. Analytical Framework and Data Creativity that became the basis of creative industry was not novel thing or definition. Since the emergence of western tradition, starting from Plato to Freud, to Popper, creativity was known as divergent, impulsive, and messy (De Bono, 1992, in DeFillipi, R., et.al, 2007). The idea showed that creativity was attached to an individual, to his or her personality that made him similar to a genius (Bilton and Leary, 2002, Boden, 1994, in DeFillipi, R, et.al., 2007). These ideas were conventional perspective of creativity. The modern research had shifted the conventional perspective of creativity that depended on the individual who owned it into creativity that was attached on a social process in an organization. The context of creativity had expanded, not limited to a certain individual, but becoming an organization or an institution. Moeran s (2011) research showed that creativity did not happen instantly in a vacuum room, but to understand the existence of process. Moeran emphasized that creativity in cultural products was limited to some factors and how the deals existing in each factor that became the limitation were related to social system in which creative process became an important aspect to be analyzed. This research had analyzed the existence (or non-existence) of the six factors and affirmed it, in creative business established by young entrepreneurs in four cities in West Java. The previous initial study (Barlian, et al., 2015) had added another additional factor, which was networking that became the initial findings in Bandung. Seven factors that could become the driving and inhibiting factors of creativity in West Java were represented in Figure 1.
Network Material and technology Time to produce Atmosphere / environment CREATIVITY: STIMULANT & CONSTRAINTS Social environment (government) Financial Esthetics Figure 1. Seven Factors Resulting in Creative Process The survey that was conducted to 388 young entrepreneurs younger than 40-year-old who had established creative industry in fashion and handcrafting, was followed-up in this research. Some focus group discussion had also been conducted in four cities in West Java. However, in 2016, the observed cities were not all four (similar to the previous study), rather, it was only conducted in Bandung, Tasikmalaya, and Garut. This was caused by the fact that the data from Cirebon had been included, because the FGD had not been concluded. Some data obtained in 2015 were summarized in Table 2, Table 3, and Figure 2. The data on table and figure showed the average age of entrepreneurs and the duration (period) of their businesses involvement, and their educational background. Table 2. Area/City Tabulation and the Respondents Duration of Business Establishment 1-5 year 6-10 year 10-15 year 16-20 year > 20 year Kota Garut 68 15 8 4 2 70% 15% 8% 4% 2% Cirebon 47 24 5 8 0 56% 29% 6% 10% 0% Bandung 87 16 3 0 1 81% 15% 3% 0% 1% Tasikmalaya 43 29 9 5 4
47% 32% 10% 5% 4% Table 3. Respondents Age 16-20 year 21-25 year 26-30 year 31-35 year 36-40 year Garut 0 12 32 28 25 0% 12% 33% 29% 26% Cirebon 0 6 22 23 33 0% 7% 26% 27% 39% Bandung 6 29 36 19 17 6% 27% 34% 18% 16% Tasikmalaya 0 8 23 39 30 0% 8% 23% 39% 30% Tasikmalaya 10 32 29 1 23 5 Bandung 6 12 46 10 29 4 Cirebon 31 25 23 0 5 Garut 1 22 50 7 17 0 0% 20% 40% 60% 80% 100% SD SMP SMA D3 S1 Tidak sekolah/lainnya Figure 2. Educational Background The data on table and figure showed that the majority of business period were still in early stage, which was between one to five years old (245 respondent or 65%), and only seven of them with 20-year-old business involvement. Creative young entrepreneurs with six to ten years of business involvement were 84 people, and the ones with 10-15 year-old business were found to be 25 people, and people with 16 to 20 year-old business were 17 people. The data showed that there was a tendency of decrease of respondents number based on the duration of business involvement. Mostly, the young entrepreneurs had 1-15 years old of business involvement. The
age of these young entrepreneurs was between 16 to 40 years old, with highest proportion of 70% in 26-35 years old. There were 40% of women entrepreneurs and 60% of male entrepreneurs. The last education of creative young entrepreneurs mostly was senior high school graduates (148 of 388 orang), followed by junior high school graduates (91 of 388) and Bachelor s Degree (Sarjana or S1) comprising 69 of 388 orang. If seen through the business city and their last education, Bandung tended to have young entrepreneurs with higher educational background. There were only 22 of 107 entrepreneurs with junior high school or lower than that (or others), and the others (85 people) were senior high school graduates, diploma, or bachelors degree graduates in Bandung. On the contrary, there was no businessman in Cirebon with Bachelor s degree and mostly were elementary school graduates (31 of 84 people). From the four observed cities, there were three dominating creative industry sectors, which were (i) handcrafting, (ii) fashion, and (iii) culinary. The proportion of these three sectors in four cities was shown in Figure 4. 100% 80% 60% 40% 20% 0% 26 14 0 8 57 54 70 17 42 69 8 23 Kerajin an 30% Fashion 39% Fesyen Kuliner Kerajinan Kuliner 31% Figure 3. Domination of Creative Industry Sector in Four Cities in West Java Creative industry entrepreneurs in the four observed cities was still dominated with micro-scale business, either without employees (36%) or with 1 to 5 employees (61%). On the other hand, the percentage of other entrepreneurs with 6 to 10 employees (or small business) only comprised of 3% or 10 businesses. From the interview conducted with young entrepreneurs from these four cities regarding the maintenance of their business, the data were obtained through regression analysis and were concluded in Table 4, which was the description of entrepreneurs.
Table 4. Personal Description of Entrepreneurs Garut Cirebon Bandung Tasikmalaya Target achievement 4.13 4.00 4.00 4.13 Communication with other parties 4.07 4.42 4.07 4.10 Communication with employees 3.98 4.43 4.11 4.19 Physical Health 3.92 4.34 4.02 4.16 Enthusiasm in running the business 4.09 4.24 4.47 4.24 Willingness to face risks 3.91 4.16 4.17 4.29 The need to lead 3.91 4.23 4.08 4.35 Patient 4.27 4.10 4.09 4.35 Strong need of money 4.14 4.22 4.50 4.43 Systematic 3.82 4.20 4.03 4.32 Creating new ideas 4.27 4.17 3.81 4.25 Persistence/tenacity 4.31 4.07 4.19 4.28 Self-confidence 4.40 4.24 4.28 4.28 Taking initiative 3.95 4.39 4.16 4.32 Competitive 3.97 4.18 4.00 4.51 Broad knowledge 3.99 4.12 3.95 4.57 Young creative entrepreneurs in Cirebon had the superiority in communication and initiative. The analysis showed that there was a significant and positive correlation between initiative and communication with other parties, with coefficient value (Kendall s Tau) of 0.245. This showed that communication and initiative could strengthen each other. Entrepreneurs in Garut excelled in its persistence/tenacity and self-confidence. Tenacity and self-confidence had strong relation, as it was proven by bivariate correlation test with Kendall s Tau coefficient value of 0.556. Uniqueness of characteristics of entrepreneurs of each city was summarized into the following points: 1. Entrepreneurs in Garut tended to have strong persistence and tenacity and selfconfidence. 2. Entrepreneurs in Tasikmalaya tended to be more experienced and long-run business with strong competitiveness and broad knowledge. 3. Entrepreneurs in Bandung tended to be younger and they had strong enthusiasm and good communication skills, and were able to maintain their networking. 4. Entrepreneurs in Cirebon had higher ability to take initiative.
The support for business sustainability was found to be different between each observed city. In Bandung, entrepreneurs had high support from the surrounding and family; on the other hand, in Cirebon, government support and business relationship had stronger driving factor business sustainability. Entrepreneurship in Garut had support of capital and the access for additional or loaned capital that encouraged business sustainability. Entrepreneurship in Tasikmalaya did not have better support if compared to other cities. The data were obtained from the analysis of capital, support (family and government) and the opportunity and surrounding environment on Table 5. Table 5. The Analysis of Internal-External Environment Garut Cirebon Bandung Tasikmalaya Having enough starting 4.28 3.81 4.11 4.06 capital Having time to run business 4.13 4.18 4.38 4.07 Having business relation with other parties Having the environment to support the business 3.98 4.18 4.16 4.00 4.11 4.40 4.48 3.93 Having family support 4.52 4.48 4.63 3.87 Having the chance to join exhibition to other cities of countries Support or role from the government (central/local) in business development If there is a lack of capital, there is another opportunity to receive additional capital or loan 3.75 4.05 3.72 3.76 4.02 4.25 3.90 3.75 4.09 3.77 3.73 3.53 3. Case Studies Fifty entrepreneurs were invited to a creative-based SME workshop in Bandung. Out of fifty entrepreneurs, more detailed or in-depth interview was conducted to ten young entrepreneurs in order to fulfill the information needed for the research. Furthermore, the researcher also conducted two FGDs with some experts to support the research findings. From the interview with ten young entrepreneurs from three cities, the research found some important points which will be presented in Table 6.
Table 6. Summary of Interview with Entrepreneurs from Three Cities Creativity Aspects need to be Entrepreneurs in Entrepreneurs Entrepreneurs in Questioned/Confirmed Bandung in Garut Tasikmalaya 1. Needed starting capital Driven by passion, then by learning to open a business, plus knowledge and skills in fashion and accessories. Do not need huge financial capital, enough to make the order (from the customers down payment) Branding in the start of business by building image according to the customers products and target 2. Strategies/factors to Maintain networking maintain the continuality (local and international) of the business Maintain consumer s (creativity) loyalty by providing limited design (not many numbers of product for one design) Design is adjusted to consumer s personality The choice of good or high quality and unique raw material Hand-made production 3. The existence of external Social media are the role most determining factor (instagram, line); besides they could help establishing the connection for the existing customers, social media could also establish new networking 4. Target market Limited market that really like their product (niche), both local and The financial starting capital is quite huge because it is mass-produced Skill capital is hereditary (family business) Become the main manufacture, therefore, having many small stores as customers Start to market products to other cities Join exhibition or festival Local government have good role in maintaining local culture and introduce them to local tourists People in Garut and its surrounding areas The financial starting capital is quite huge Learning through other communities (in Bandung) quite helps in developing the business The existence of fixed customers, even though the business is not too big Start to pay attention to current trend (especially the ones popular among the youths) Pay attention to the growing trend in Bandung Initiative still comes from each entrepreneurs Mostly people who live in Tasikmalaya, or people who want
international 5. Pricing For limited order, the price should be quite high because the product designing process takes time (should be creative and good enough) 6. Target of Business Nothing, being happy is Achievement the most important aspect No minimal or maximum, only to save money for vacation 7. The existence of The profit of handcraft rising/reducing business products tends to slowly profit cycle increase, and never decline Fashion product fluctuates since there is an influence from the price of imported raw material People who love batik from outside the town Rarely change, it has fixed pricing which is determined for years Can pay employees It is important to sell all products Small business experienced loss of profit, and look for new business opportunity Big business tends to remain existing to bring souvenirs to out of town Now, there are many variations of new trends, therefore, the price could be quite expensive Low-Middle There is no sighting for this, because new business has just started to run and develop slowly The study found some interesting points as presented in the table above, and they were described through some of the following interview quotes: 1. Unique design and quality consistency, in Bandung: I don t take the leather material I use for book-binding handcrafting from Cibaduyut which is already well-known in Bandung I buy them from Yogyakarta (outside Bandung) because I prefer raw texture, and rougher. I prefer rougher texture, unlike the ones from Cibaduyut. I make all of my products by hand, and I don t use any machines to make them. This will make my products look more vintage moreover, I also need to make a design according to the character of my customers. Design for an illustrator should be different from the one for artists, and it will also be different from scrapbook, they will prefer more tenuous stitching my customers will need to feel that the book-binding I made matched their personalities, oh, this really fits me is the comment I would like to hear (Interview with Ibu Tarlen and friends in Bandung, on 20 July 2016). There are designs for repeat-order, I pay attention to my customers. If they ordered large number of products, the design will
not be too complicated because I will hire an assistant. These products are handmade, I make these by hand, I would not be able to fulfill the order there are also some designs for single order, one by one, I do not know whether I could make similar design for other people or not, because usually people s personalities are different from one another (Interview with Ibu Tarlen and friends in Bandung, on 20 July 2016). There should be some periodic changes of ideas/designs, usually I have personal idea I love comfortable materials that feel comfy to wear and it will also feel exclusive, different from other products I want my customers to get comfort and beauty of my products (Interview with Ibu Lenny and friends in Bandung, on 20 July 2016). The process for designing my products takes time, because I make my products from bronze, it has unique material and color, it is unique, and durable. There is one time that my material order takes longer time, and my starting asset also gets hold up and stuck for some time, but my inspired ideas should be in good quality and feel comfortable, especially for myself. The choice of material and color should be well-considered. (Interview with Ibu Lenny and friends in Bandung, on 20 July 2016). 2. Family business in Garut: I continue my father s business we have some employees. I also place my products in some stores in Bandung. The starting capital was already provided by my parents, in form of equipment, raw material, and employee (Interview with Rizal and friends, on 10 August 2016) 3. Product Variation in Tasikmalaya and Garut: Young people in Tasik start to like hanging out since I opened this café I named this café as Kafe Sekolah, because the customers are mostly high school students. The place is also a bit minimalist. The number of café in Tasik is not as many as in Bandung, so my place could be considered as a favorite place to hang out. Besides selling accessories, I also sell simple foods such as boiled noodles, and the price is also inexpensive, it is about 10.000 to 15.000 rupiahs. My café is quite successful, the profit could reach 30 million rupiahs a month (Interview with Bedul and friends, on 5 August 2016). in Garut, people have their own preference, either on clothes (mostly Garut batik) or foods. Since I was a kid, I was used to this preferences, and as I know about this, people will prefer to buy our product, which are mostly the residents of Garut. Now I am still trying
to add some variations. And I plan to have one or two variations each year to increase our selling (Interview with Rizal and friends, on 10 August 2016). 4. The Need of Establishing Networking: Bandung, Tasikmalaya, Garut For me, image branding is important I used to love blogging, but now I rarely did it because I move to instagram. I need to show profile data, hobby so that people who buy my products will know me the one who make the product for them. It s important because the number of people who love book binding is sparse, and we have more people from abroad I need to show that side of mine in their mind. Social media have huge part to play to expand networking, besides from mouth-to-mouth talk from people who bought my product. Alhamdulillah, in Bandung, even in Indonesia, people start to know that if they need book binding service, they will contact me (Interview with Ibu Tarlen and friends in Bandung, on 20 July 2016). In Tasik, there weren t many communities, unlike in Bandung. So, if I go to Bandung, I will make time as many as possible to have discussion about business, finding out current trends, and finding more friends to discuss about new ideas in business. Networking is indeed important, unfortunately it is still rare in Garut, and it probably might not exist in here. I still depend on friendship networking in Bandung and with my friends from ITB... (Interview with Bedul and friends, on 5 August 2016). We haven t had any plan to open our business in Bandung because the stores in Bandung had their own strategy it is different from the stores in Garut. We will need someone we could trust; in Garut, most of the small stores were owned by families for us, trust is an important factor. Having networking of course is a good thing to develop our business, but the networking should be trustworthy and reliable (Interview with Rizal and friends, on 10 August 2016). 4. Conclusion Based on the explanation above, some important points could be concluded; they are: 1. There was a tendency that entrepreneurs focusing on creative industry field in Bandung had started their business in younger age (earlier), which was between twenty-six and thirty years old, if compared to the other two research cities, Garut and Tasikmalaya. It was found in Garut, that the age of starting business tended to be
later. The businesses were run by entrepreneurs who was in between thirty-six and forty years old. 2. The starting capital needed by young entrepreneurs in Bandung focused more on their knowledge and skill asset, besides passion which encouraged the establishment of their creative industry. On the other hand, in Garut, entrepreneurs tended to prioritize monetary and equipment assets, because most of the businesses were family inheritance. In Tasikmalaya, the trend in trying new things as varieties of products started to emerge. Even though it was an attempt to emulate Bandung, the young entrepreneurs in Tasikmalaya were dauntless in developing their ideas in their home city. 3. Handcrafting industry in Bandung had limited market target due to its product uniqueness. The changing product and consistency of quality became important secret for entrepreneurs to sustain and develop their business. The business might not be instantly successful, but it could slowly develop and survive in the business world until today. Branding was another important factor that should be paid attention to from the start of business establishment and sustained well. 4. In terms of pricing, entrepreneurs in Bandung had higher power; therefore, higher price for their products. This would be caused by the design and product variation they offered. 5. Networking was deemed as equally important factor in all three cities, not only in Bandung. The difference among these cities was the fact that young entrepreneurs had the talent to build networking and nurture it due to the supporting business climate and atmosphere of the city. The numerous communities and well-known schools/universities in Bandung equipped the youths to establish their own creative industry in the city by applying their adequate knowledge and skills. Meanwhile, in other cities, there were not many communities, and the youths who were in favor of expanding their networking usually came to Bandung to join the community. There was a tendency that trend was created and started in Bandung. 6. Each city, Bandung-Garut-Tasikmalaya, had their own regional excellence and potential. Bandung had high creative climate and supported with big number of communities for creative people and huge varieties of design; Garut excelled in
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