Entrepreneurial Innovation: Strategy and Competition Aspects (Studies on Entrepreneurship, Structural Change and Industrial Dynamics) 9811647941, 9789811647949

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Studies on Entrepreneurship, Structural Change and Industrial Dynamics

Vanessa Ratten   Editor

Entrepreneurial Innovation Strategy and Competition Aspects

Studies on Entrepreneurship, Structural Change and Industrial Dynamics Series Editors João Leitão University of Beira Interior, Covilhã, Portugal Tessaleno Devezas Atlantica—Instituto Universitário Oeiras, Lisbon, Portugal C-MAST (Center for Aerospace Science and Technologies)—FCT Lisbon, Portugal

The ‘Studies on Entrepreneurship, Structural Change and Industrial Dynamics’ series showcases exceptional scholarly work being developed on the still unexplored complex relationship between entrepreneurship, structural change and industrial dynamics, by addressing structural and technological determinants of the evolutionary pathway of innovative and entrepreneurial activity. The series invites proposals based on sound research methodologies and approaches to the above topics. Volumes in the series may include research monographs and edited/contributed works. This is a SCOPUS-indexed series. More information about this series at https://link.springer.com/bookseries/15330

Vanessa Ratten Editor

Entrepreneurial Innovation Strategy and Competition Aspects

Editor Vanessa Ratten La Trobe Business School La Trobe University Melbourne, VIC, Australia

ISSN 2511-2023     ISSN 2511-2031 (electronic) Studies on Entrepreneurship, Structural Change and Industrial Dynamics ISBN 978-981-16-4794-9    ISBN 978-981-16-4795-6 (eBook) https://doi.org/10.1007/978-981-16-4795-6 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore

Acknowledgements

This book titled Entrepreneurial Innovation: Strategy and Competition Aspects is on a very relevant and contemporary topic given the ongoing COVID-19 pandemic. Businesses are now more than ever needing to find entrepreneurial innovations in order to deal with the uncertainty in the international environment. As a result, those businesses which can act in a strategic and competitive way are likely to succeed more than others. Thus, editing this book during the COVID-19 pandemic means that I and my fellow researchers can focus on how to help solve the problems caused by the changes in order to bring about positive societal results. I thank Lucie Bartonek for her help and support with this book as it is much appreciated. I also thank my family – mum Kaye, dad David, brothers Hamish and Stuart, sister-in-law Tomomi and niece Sakura. Thank you for your support.

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Contents

 Entrepreneurial Innovation Through Strategy and Competition ��������������    1 Vanessa Ratten  Porter’s Business Strategies and Business Performance in SMEs��������������    7 Emil Knezović and Aida Hamur Digital Innovation in Sport – Barriers and Opportunities for Branded Fitness Apps for Fans ����������������������������������������������������������������   25 Alex Fenton, Keith D. Parry, Simon Chadwick, Guilherme Guimarães, and Varid Aeron Market Bank as Alternative to MSMEs Fund Provider: Lesson of Entrepreneurship from Indonesia ������������������������������������������������   43 Sonny Eli Zaluchu, Petrus Usmanij, and Vanessa Ratten Sustainable Entrepreneurship and Marketing Strategy: Exploring the Consumer “Attitude–Behavioural Intention” Gap in the Sport Sponsorship Context����������������������������������������������������������   53 Koronios Konstantinos, Ntasis Lazaros, Dimitropoulos Panagiotis, and Vanessa Ratten  Using Mathematical Framework to Nudge the Customers��������������������������   63 Sandeep Bhasin and Bhawna Kumar The Sense of Place Value and the Actors Involved: Indigenous Entrepreneurship in Indonesia ��������������������������������������������������   71 Astrid Kusumowidagdo and Cicilia Larasati Rembulan  Sport Entrepreneurship in Indonesia������������������������������������������������������������   89 Renata Putri and Louis Moustakas  Indian Artisans: Opportunities in Disguise ��������������������������������������������������   97 Sandeep Bhasin and Bhawna Kumar

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Contents

Personality, Acculturation and Performance of Artisan Entrepreneurs in Ghana����������������������������������������������������������������  105 George Acheampong, Ernest Yaw Tweneboah-Koduah, and Oliver Kwabena Aggrey Empowering the Batak Toba Home Industry in North Sumatera: A Descriptive Study of Artisan Entrepreneurship����������������������������������������  121 Endang Purwaningrum, Ina Sukaesih, Petrus Usmanij, and Vanessa Ratten Muslimpreneur: Entrepreneur Potential Characteristics in Indonesia as the Country with the Largest Muslim Population in the World����������������������������������������������������������������������������������  129 Hanny Nurlatifah, Asep Saefuddin, Marthin Nanere, and Vanessa Ratten Micro Small Medium Enterprises (MSMEs) and Indonesian National Economies During and Post COVID-19����������������������������������������������������������������������������  141 Rahmadi Sunoko, Asep Saefuddin, Marthin Nanere, and Vanessa Ratten  Technology Entrepreneurship: Fintech Lending in Indonesia��������������������  151 Roberto Akyuwen, Marthin Nanere, and Vanessa Ratten Entrepreneurship Landscape of Translating Business in Indonesia: An Observation and Online Survey During Covid 19 Pandemic ����������������������������������������������������������������������������  177 Ina Sukaesih, Endang Purwaningrum, Petrus Usmanij, and Vanessa Ratten

Contributors

George Acheampong  University of Ghana Business School, Madina, Ghana Varid Aeron  University of Salford, Salford, UK Oliver Kwabena Aggrey  University of Ghana Business School, Madina, Ghana Roberto Akyuwen  Pancasakti University of Tegal, Tegal, Indonesia Sandeep Bhasin  Amity International Business School, Amity University, Noida, Uttar Pradesh, India Simon Chadwick  Emlyon Business School, Écully, France Alex Fenton  University of Salford, Salford, UK Guilherme Guimarães  Ativa Esporte, Rio de Janeiro, Brazil Aida Hamur  Faculty of Business and Administration, International University of Sarajevo, Ilidža, Bosnia & Herzegovina Emil Knezović  Faculty of Business and Administration, International University of Sarajevo, Ilidža, Bosnia & Herzegovina Koronios  Konstantinos  Department of Accounting and Finance, University of Peloponnese, Kalamata, Greece Bhawna Kumar  RBEF (Amity Education Group), Noida, Uttar Pradesh, India Astrid Kusumowidagdo  Universitas Ciputra, Surabaya, Indonesia Ntasis  Lazaros  Department Tripoli, Greece

of

Economics,

University

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Peloponnese,

Louis Moustakas  Institute for European Sport Development and Leisure Studies, German Sport University, Cologne, Germany Marthin  Nanere  La Trobe Business School, La Trobe University, Melbourne, VIC, Australia ix

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Contributors

Hanny Nurlatifah  University of Al Azhar Indonesia, Jakarta, Indonesia Dimitropoulos  Panagiotis  Department of Sport Management, University of Peloponnese, Sparti, Greece Keith D. Parry  Bournemouth University, Poole, UK Endang Purwaningrum  Politeknik Negeri Jakarta, Jakarta, Indonesia Renata Putri  Ganesport Institute, Jakarta, Indonesia Vanessa Ratten  La Trobe Business School, La Trobe University, Melbourne, VIC, Australia Cicilia Larasati Rembulan  Universitas Ciputra, Surabaya, Indonesia Asep Saefuddin  IPB University, Bogor, Indonesia Al-Azhar University of Indonesia, Jakarta, Indonesia Ina Sukaesih  Politeknik Negeri Jakarta, Jakarta, Indonesia Rahmadi Sunoko  School of Business, IPB University, Bogor, Indonesia Ministry of Marine Affairs and Fisheries, Jakarta, Indonesia Ernest  Yaw  Tweneboah-Koduah  University of Ghana Business School, Madina, Ghana Petrus Usmanij  La Trobe University, Melbourne, VIC, Australia Politeknik Negeri Jakarta, Depok, Indonesia Sonny Eli Zaluchu  STT Baptis Indonesia, Semarang, Indonesia

List of Figures

Porter’s Business Strategies and Business Performance in SMEs Fig. 1 Conceptual model���������������������������������������������������������������������������������   15 Market Bank as Alternative to MSMEs Fund Provider: Lesson of Entrepreneurship from Indonesia Fig. 1 Relational cycle of market bank�����������������������������������������������������������   46 Fig. 2 Logical sequence of market bank business strategy�����������������������������   50 Sustainable Entrepreneurship and Marketing Strategy: Exploring the Consumer “Attitude–Behavioural Intention” Gap in the Sport Sponsorship Context Fig. 1 Proposed model������������������������������������������������������������������������������������   58 The Sense of Place Value and the Actors Involved: Indigenous Entrepreneurship in Indonesia Fig. 1 Map of Indonesia and locations of the three destinations. (Source: Author)�����������������������������������������������������������������������������������   75 Fig. 2 Borobudur Temple (from left to right: relief example, view from the ground level, the stupa within the temple complex). (Source: Author)������������������������������������������������������������������   77 Fig. 3 Location map of Balkondes Borobudur. (Source: Author)�������������������   77 Fig. 4 Area within Balkondes Borobudur (rest area and homestay). (Source: Author)�����������������������������������������������������������������������������������   78 Fig. 5 Area map of Sade Village. (Source: Author)����������������������������������������   79 Fig. 6 Sade-style handmade woven fabric on display. (Source: Author)��������   80 Fig. 7 Area map of Pasar Terapung, Lok Baintan. (Source: Author)��������������   81 Fig. 8 Acil-acil (seller) activities in Lok Baintan��������������������������������������������   82 Micro Small Medium Enterprises (MSMEs) and Indonesian National Economies During and Post COVID-19 Fig. 1 Issues faced by marine and fishery MSMEs (Sunoko, 2016)���������������  147

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List of Tables

Porter’s Business Strategies and Business Performance in SMEs Table 1 EU Criteria for MSMEs����������������������������������������������������������������������   10 Table 2 Entity level for MSMEs in B&H���������������������������������������������������������   10 Table 3 Basic indicators of MSMEs in B&H���������������������������������������������������   11 Table 4 Pretesting indicators����������������������������������������������������������������������������   16 Table 5 Results of multiple regression analysis�����������������������������������������������   17 Digital Innovation in Sport – Barriers and Opportunities for Branded Fitness Apps for Fans Table 1 Participant details��������������������������������������������������������������������������������   31 Sustainable Entrepreneurship and Marketing Strategy: Exploring the Consumer “Attitude–Behavioural Intention” Gap in the Sport Sponsorship Context Table 1 Regression weights������������������������������������������������������������������������������   59 The Sense of Place Value and the Actors Involved: Indigenous Entrepreneurship in Indonesia Table 1 General characteristics of Balkondes Borobudur, Sade Village in Lombok, and Pasar Terapung in Lok Baintan��������������������   76 Table 2 The comparison in term of sense of place between Borobudur Balkondes, Sade Village of Lombok, and Lok Baintan Floating Market�����������������������������������������������������������������������������������   83 Table 3 Actors participating in Borobudur Balkondes, Lombok’s Sade Village, and Lok Baintan floating market�������������������������������������������   85 Indian Artisans: Opportunities in Disguise Table 1 Classifying handicrafts (author’s own)�����������������������������������������������  100

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List of Tables

Personality, Acculturation and Performance of Artisan Entrepreneurs in Ghana Table 1 Profile of respondents and their enterprises����������������������������������������  111 Table 2 Measurement model����������������������������������������������������������������������������  112 Table 3 Descriptive statistics and correlations�������������������������������������������������  114 Table 4 Structural model assessment results����������������������������������������������������  114 Empowering the Batak Toba Home Industry in North Sumatera: A Descriptive Study of Artisan Entrepreneurship Table 1 Ulos and its usage�������������������������������������������������������������������������������  125 Micro Small Medium Enterprises (MSMEs) and Indonesian National Economies During and Post COVID-19 Table 1 Indonesian economy 2011−2020��������������������������������������������������������  142 Table 2 MSMEs criteria in Indonesia��������������������������������������������������������������  143 Table 3 Empowerment target several indicators of entrepreneurship, SMEs and cooperatives�����������������������������������������������������������������������  145 Table 4 SMEs credit in Indonesia��������������������������������������������������������������������  147 Entrepreneurship Landscape of Translating Business in Indonesia: An Observation and Online Survey During Covid 19 Pandemic Table 1 The respondent list of the online opinion survey��������������������������������  179

Entrepreneurial Innovation Through Strategy and Competition Vanessa Ratten

Abstract  Entrepreneurial innovation provides a way for individuals and businesses to act in a competitive manner in the global marketplace. This is crucial during and after the COVID-19 pandemic due to the shifts in working conditions and societal life. The aim of this chapter is to discuss what entrepreneurial innovation is in light of changing environmental contexts. To do this the role of strategy and competition is emphasised as a way of understanding the practice of entrepreneurial innovation. Thereby contributing to the growth of the field but also to suggest some new practical and managerial implications that will help business managers act in a more entrepreneurial way through their innovation strategies. Keywords COVID-19 · Competition · Entrepreneurship · Global marketplace Innovation · Strategy

1 Introduction Entrepreneurial innovation is a concept that integrates a competitive and strategic approach to business (Ferreira et al., 2017b). This is important in the global marketplace that emphasises quick movement through entrepreneurial business endeavours. Entrepreneurship is a broad term that means different things depending on the international context (Moreira et  al., 2019). For many, entrepreneurship is about financial gain through innovation, but it can also mean other things such as leadership and thought processes (Ferreira et al., 2017a). This makes it important to refine the concept of entrepreneurship by partnering it with innovation. Thereby enabling a more defined understanding about the way entrepreneurship occurs and its influence on change (Ratten & Usmanij, 2021). V. Ratten (*) La Trobe Business School, La Trobe University, Melbourne, VIC, Australia e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 V. Ratten (ed.), Entrepreneurial Innovation, Studies on Entrepreneurship, Structural Change and Industrial Dynamics, https://doi.org/10.1007/978-981-16-4795-6_1

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Innovation is a term used to represent some form of change. This can include general innovations that impact on the productivity of an organisation such as mobile commerce or more specific forms such as the introduction of wireless computing (Apostolopoulos et al., 2020). Any form of innovation represents a change to the status quo. Thus, timing is important with innovation as some innovations receive more positive market feedback whilst other forms of innovation take time for users to understand the change (Ratten, 2020). Typically, innovation occurs in an incremental or radical way. Incremental innovation is more common as it occurs in a step by step way that makes the change increase over time (Ratten et al., 2007). Radical innovation is different as it represents a major difference to current circumstances and fundamentally changes business. However, innovation can occur in both an incremental and radical way thus there is some inbetween classifications on innovation. Therefore, innovation can be better understood through a process perspective (Santos et al., 2021). There are different types of innovation such as technological, sport and social. Technological innovation represents changes in information and communications technology. In recent years there have been major advances with mobile phones to create a more ecosystem environment (Ratten & Jones, 2021). This has resulted in the internet of things in which technological devices are connected. Sport innovation incorporates digital forms of technological change. This is evident with real time broadcasting and digital payment methods. Moreover, there is an increase in fitness technology such as smart watches and devices (Miragaia et al., 2017). Social innovation represents a more non-profit perspective of innovation that incorporates societal impact (Apostopoulos et al., 2020).

2 Goals of This Book The goal of this book is to focus on entrepreneurial innovation from a strategy and competitive perspective. Thereby adding to the existing literature and practice of entrepreneurial innovation. Most research and practice tends to differentiate entrepreneurship and innovation and not talk about both concepts together. This book takes the view that entrepreneurship can be innovative and when it is there is some form of competitive advantage. Therefore, it is useful for business and researchers to think about entrepreneurial innovation in a new way as it offers a more holistic perspective. The chapters in this book all discuss entrepreneurial innovation but from different viewpoints. Thereby adding to the existing discussion about entrepreneurial innovation in terms of contextual approaches. Not all types and forms of entrepreneurial innovation are the same, so it is useful to obtain a range of perspectives. This enables us to better understand the way entrepreneurship incorporates innovation.

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3 Practical Implications Individuals and businesses need to find new ways to be entrepreneurial. This means focusing on recognising opportunities before others do in order to stay competitive. The chapters in this book provide examples of how entrepreneurship is innovative and enables creative thinking to emerge. This will be helpful in thinking outside the box in terms of what entrepreneurial innovation is and how it occurs in a business environment. For managers it is important to have an open mind in terms of possibilities. This will lead to fruitful business opportunities emerging that can capture additional market share. To do this, managers need to think about entrepreneurial innovation in a competitive manner in order to leapfrog other businesses.

4 Theoretical Implications Entrepreneurial innovation as a concept has been somewhat overlooked in favour of more general innovation and entrepreneurship theories. This means there is a gap in the current literature that this book fills by focusing on the role of entrepreneurial innovation in business endeavours. Whilst there have been articles published on entrepreneurial innovations some with high citation rates, there still is a lack of fully developed theory around this topic. This means each of the chapters in this book present a new way of thinking about entrepreneurial innovation and contributes to the development of entrepreneurial innovation theory. Other theories such as the knowledge spillover theory of entrepreneurship and entrepreneurial ecosystems theory have gained popularity but the theory of entrepreneurial innovation is just as important. Thus, this book will contribute to a more defined body of theory related to entrepreneurial innovation. As a theory entrepreneurial innovation is a good way to understand the dynamics within entrepreneurship and how entrepreneurship can be combined with innovative capabilities.

5 Suggestions for Future Research Much more work needs to be done on entrepreneurial innovation. It is a topic of substantial interest to business professionals, researchers and policy makers due to its ability to translate practice into theory. Future research should focus more on developing a theory of entrepreneurial innovation with the view to making it a foundational theory. This would help highlight its usefulness as a theory and why it is embedded within the practice of most businesses. Longitudinal research on how entrepreneurial innovation develops over time should be conducted in terms of understanding why entrepreneurship can be innovative. This would enable a more

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detailed focus to be placed on the role of leaders in a business’s development and how this translates into entrepreneurial endeavours in other parts of the organisation. More research should take a mixed methods approach to combine quantitative and qualitative data techniques in understanding the process of entrepreneurial innovation. As entrepreneurship and innovation can be instantaneous but also developed over time it is important to take a broad perspective about what entrepreneurial innovation is. Therefore, qualitative data in the form of interviews and case studies can be conducted to further investigate how entrepreneurial innovation develops. This can be supplemented by quantitative data in the form of surveys that study relationships between entrepreneurial innovation and other concepts. Thus, it is a very exciting time for research on entrepreneurial innovation. Moreover, by adding the competitive and strategy elements to entrepreneurial innovation, future research can further progress the field. This would enable the concept of entrepreneurial innovation to be more interdisciplinary in nature and bring in approaches from other fields.

6 Conclusion This chapter has presented an overview of what entrepreneurial innovation is and why it is an important component of business management. The reason why entrepreneurship needs innovation was discussed with a view to developing a more substantial body of knowledge on entrepreneurial innovation. The goals of this book were stated together with the theoretical contributions. In addition, the practical and future research suggestions were discussed that highlight the importance of entrepreneurial innovation.

References Apostolopoulos, N., Ratten, V., Stavroyiannis, S., Makris, I., Apostolopoulos, S., & Liargovas, P. (2020). Rural health enterprises in the EU context: A systematic literature review and research agenda. Journal of Enterprising Communities: People and Places in the Global Economy, 14, 563–582. Ferreira, J.  J., Fernandes, C.  I., & Ratten, V. (2017a). Entrepreneurship, innovation and competitiveness: What is the connection? International Journal of Business and Globalisation, 18(1), 73–95. Ferreira, J. J., Ratten, V., & Dana, L. P. (2017b). Knowledge spillover-based strategic entrepreneurship. International Entrepreneurship and Management Journal, 13(1), 161–167. Miragaia, D. A., Ferreira, J., & Ratten, V. (2017). Corporate social responsibility and social entrepreneurship: Drivers of sports sponsorship policy. International Journal of Sport Policy and Politics, 9(4), 613–623. Moreira, J., Marques, C. S., Braga, A., & Ratten, V. (2019). A systematic review of women’s entrepreneurship and internationalization literature. Thunderbird International Business Review, 61(4), 635–648.

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Ratten, V., Dana, L. P., Han, M., & Welpe, I. (2007). Internationalisation of SMEs: European comparative studies. International Journal of Entrepreneurship and Small Business, 4(3), 361–379. Ratten, V. (2020). Coronavirus (covid-19) and entrepreneurship: Changing life and work landscape. Journal of Small Business & Entrepreneurship, 32(5), 503–516. Ratten, V., & Jones, P. (2021). Covid-19 and entrepreneurship education: Implications for advancing research and practice. The International Journal of Management Education, 19(1), 100432. Ratten, V., & Usmanij, P. (2021). Entrepreneurship education: Time for a change in research direction? The International Journal of Management Education, 19(1), 100367. Santos, E., Oliveira, M., Ratten, V., Tavares, F. O., & Tavares, V. C. (2021). A reflection on explanatory factors for COVID-19: A comparative study between countries. Thunderbird International Business Review, 63(3), 285–301.

Porter’s Business Strategies and Business Performance in SMEs Emil Knezović and Aida Hamur

Abstract  Companies are prone to develop more creative and innovative solutions to gain a competitive advantage, which would surprise and find their competitors unprepared. Such solutions often shed a light on the undisputable importance of adequate and consistent implementation of business strategies. For decades, business strategies are the key to achieving and maintaining a competitive advantage and ultimately gaining overall better organizational outcomes, and small businesses are not an exception. Regarding the typologies on business strategies, Porter’s generic business strategies (cost leadership, differentiation, and focus) remain one of the most widely accepted among practitioners and academicians. This study investigates Porter’s typologies and business performance in micro, small, and medium enterprises (MSMEs). A sample of 118 managers was collected using the cross-sectional survey method. Findings show that specific typologies are more favorable to business performance than others. To test hypotheses, a multiple regression was used. So far, prominent research on business strategies and business performance in MSMEs in Bosnia and Herzegovina was negligible. Therefore, this study contributes to understanding the relationship between Porter’s typologies and business performance in this context. Keywords  Business strategies · Business performance · Micro · Small · Medium enterprises · Bosnia and Herzegovina

E. Knezović (*) · A. Hamur Faculty of Business and Administration, International University of Sarajevo, Ilidža, Bosnia & Herzegovina e-mail: [email protected]; [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 V. Ratten (ed.), Entrepreneurial Innovation, Studies on Entrepreneurship, Structural Change and Industrial Dynamics, https://doi.org/10.1007/978-981-16-4795-6_2

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1 Introduction In a dynamic business environment, competitive advantage plays a significant role in overall business performance (Da Silva & Borsato, 2017). Although there is a vast amount of research that includes business performance, we can talk about relatively fragmented literature with several limitations. The most common is the measurement approach. To measure it effectively, it is impossible to rely on financial indicators solely but rather to observe it as a multidimensional construct. In fact, Dyer and Reeves (1995) proposed a four-level framework to measure performance that includes market, financial, operation, and HRM outcomes. Kourtit and Nijkamp (2011) argued that businesses survive based on their performance to generate and use new knowledge, creative solutions, and technologies. Contemporary researchers have investigated different factors as antecedents of business performance. These factors were observed as environmental such as uncertainty and competition (Bae, 2017; Liljeblom et al., 2020), organizational such as structure, culture, and strategy (Islami et al., 2020; Lee & Yu, 2004; Zhu & Jiao, 2013), and individual in terms of managerial practices and HRM (Blackburn et al., 2013; Knezović et al., 2020). The strategy-performance link has been one of the key focuses of prominent research as the importance of business strategy in terms of overall company performance is indisputable (Pour & Asarian, 2018). Research has shown that strategy’s impact on performance is double, compared to other effects such as corporate or industry effects (Wheelen & Hunger, 2012). In their work, Ferreira et al. (2015) present that two models have been dominantly used: Porter (1980) and Miles et  al. (1978). In the model presented by Miles et  al., firms are categorized as defenders, prospectors, analyzers, and reactors. Regarding the model proposed by Porter, there are three main strategic typologies: cost leadership, differentiation, and focus (Wheelen & Hunger, 2012). Although the drawback of these typologies lies in relatively general terms (Smith et al., 1989), one advantage is that they are market-oriented, where cost leadership and differentiation are specialized for mass markets, while focus strategies are specialized for niche markets. There is existent literature on the link between business strategies and business performance at different levels. For example, Prajogo and Sohal (2006) have found a significant and positive relationship between the differentiation strategy and product quality and product and process innovation, while Banker et  al. (2014) have found that both cost leadership and differentiation strategies have a positive impact on contemporaneous performance. Although researchers agree that organizational characteristics (i.e. strategy) are vital for business growth (Blackburn et al., 2013), there has been a call for more research in specific contexts. One of those contexts is micro, small, and medium enterprises (MSMEs) that are considered the main drivers of economic growth (Subhan et al., 2013). Although the overall importance for the economy, MSMEs are struggling with sustaining their performance in a long-­ run (Ates et al., 2013; Ratten et al., 2007). MSME population is rather a heterogeneous group characterized by several key differences in structure, culture, environment, and managerial practices. Besides, they are restrained by “lack of

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finance, resources, and skilled personnel” (Sharma, 2011, p. 188). All these factors make it harder to adopt business strategies that best serve their interest and help them improve their overall performance. In general, there is an abundance of research exploring relationships between business strategies and organizational performance. Still, the results are inconsistent primarily due to numerous typologies and taxonomies of business strategies and specifics of the environment they are exploring. Therefore, by applying Porter’s strategic typologies, the first objective of this study is to investigate the role of business strategies in business performance in MSMEs. Furthermore, the existing literature on MSMEs is rather in the context of developed countries (Alhakimi & Mahmoud, 2020). In the case of Bosnia and Herzegovina (B&H), we can say that the literature is negligible. This context is interesting since the environment in B&H is highly unstable, considering the indicators such as political stability, judicial effectiveness, government integrity, unemployment rate, gross domestic product (GDP) growth rate, etc. (the World Bank). Regarding MSMEs, they have a dominant share of 99.7% of all enterprises in B&H and generate 66.3% of total value added in B&H (European Commission, 2019). Furthermore, when it comes to MSME productivity, the B&H percentage is less than a third of the EU average (amounts to EUR 13,950) compared to the MSME productivity in the EU (amounts to 42,700). Hence, despite the high competitiveness among MSMEs, the overall performance of MSMEs in B&H remains underdeveloped and requires further attention and investigation. Therefore, the second objective of this study is to discuss the practical implications of business strategies for MSMEs in B&H. This chapter engages with the broader theme of the strategy-performance link by contributing to its understanding within MSMEs. First, we explore the strategic typologies, especially with the focus on the MSME sector. Then we check for their relationship with a business performance by using the data collected from managers. Finally, we discuss the practical implications that could help managers improve the overall business performance of their enterprises.

2 Literature Review and Hypotheses 2.1 Defining MSMEs in B&H When it comes to MSMEs, there is no universal definition as it varies from country to country. However, some common characteristics exist, such as that MSMEs are usually characterized as enterprises with a number of employees below a certain point. Furthermore, criteria such as revenue, ownership, or industry are relatively used factors. In 1996, European Commission defined criteria through (1) a total number of employees and (2) annual turnover or balance sheet (assets) (European Commission, 2020). This definition was slightly revised in 2003, resulting in numerical categories as presented in Table 1.

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Table 1  EU Criteria for MSMEs Category Micro Small Medium

Assets (€) ≤ 2 m ≤ 10 m ≤ 43 m

Turnover (€) ≤ 2 m ≤ 10 m ≤ 50 m

Employees < 10 < 50 < 250

Source: European Commission (2020) Table 2  Entity level for MSMEs in B&H FB&H Assets Category (BAM) Micro ≤ 0.35 m Small ≤ 4 m Medium ≤ 20 m

Turnover (BAM) ≤ 0.7 m ≤ 8 m ≤ 40 m

RS Assets Employees (BAM) ≤9 ≤ 0.25 m ≤ 49 ≤ 1 m ≤ 249 ≤ 4 m

Turnover (BAM) ≤ 0.5 m ≤ 2 m ≤ 8 m

Employees ≤5 ≤ 50 ≤ 250

Source: Law on Accounting and Auditing in FB&H (“Official Gazette of FB&H, no. 15/21) and Law on Accounting and Auditing in RS (“Official Gazette of RS, no. 94/15)

These criteria serve as a foundation for defining MSMEs within European countries. In the Balkan region, the countries applied the same approach as in Croatia and Serbia (Dudić & Cvijić, 2017). When it comes to B&H, there is no law at the state level that defines MSMEs. In fact, they are defined on the entity levels: Federation of Bosnia and Herzegovina (FB&H) and Republic of Srpska (RS). As such, they both deviate from the recommendation of the European Commission as well as between themselves. The comparative display is presented in Table 2. The data in Table 2 is retrieved from two laws: Law on Accounting and Auditing in FB&H (“Official Gazette of FB&H, no. 15/21) and Law on Accounting and Auditing in RS (“Official Gazette of RS, no. 94/15).

2.2 MSMEs Performance in Bosnia and Herzegovina Overall, businesses in B&H are seriously damaged by the unfavorable environment embodied within political and economic instability. By observing the Global Competitiveness Index (GCI), we can see that B&H is very uncompetitive (World Economic Forum, 2019). As consequences, we have high unemployment, an extensively developed black market, and migration to Western countries. Although the government plays a vital role in the economic fiasco, we cannot neglect the players at the micro-level. Keeping in mind that MSMEs are considered the engine of economic growth and valuable source of employment (Aceleanu et  al., 2014), they share the burden for the current situation. Some of the basic indicators regarding MSMEs in B&H are presented in Table 3. Regarding entrepreneurship itself, the B&H average is far below one of EU countries (European Commission, 2019). All the important indicators such as

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Table 3  Basic indicators of MSMEs in B&H Category Micro Small Medium MSMEs Large Total

Number of enterprises Number Share 59,940 90.3% 5103 7.7% 1102 1.7% 66,145 99.7% 204 0.3% 66,349 100.0%

Number of employees Number Share 192,817 39.1% 95,574 19.4% 107,171 21.7% 395,563 80.3% 97,350 19.7% 492,913 100.0%

Value-added Million (€) 786.90 933.50 955.50 2676.00 1243.50 3919.50

Share 20.1% 23.8% 24.4% 68.3% 31.7% 100.0%

Source: European Commission (2019)

intention to start a business, ownership rate, media support, and job creation are trailing. When it comes to research about MSMEs and their role in the B&H economy, they are negligible compared to the EU standards (Knezović, 2018). Furthermore, as Ghalem et al. (2016) argue that there is no single definition due to the multidimensionality of business performance concept, the MSMEs performance is even more complex. For two decades, we are witnessing the calls for more prominent financial and non-financial performance measurements (Watson, 2001), especially in small business settings. The calls are even more prominent when it comes to the determinants of business performance in MSMEs. The response to this was an extensive empirical assessment based on the interrelationship between external and internal factors (Cicea et al., 2019). Namely, the authors examined a wide array of factors from age and size (Arend, 2014), owner-manager characteristics (Blackburn et al., 2013), entrepreneurial networks (Bratkovič Kregar & Antončič, 2016), knowledge management (Pour & Asarian, 2018), strategic human resource management practices (Zehir et al., 2016), innovativeness and leadership (Alhakimi & Mahmoud, 2020; Knezović & Drkić, 2021), strategic planning (Donkor et al., 2018), business strategies (Anwar & Hasnu, 2016), etc. Although the topic has been extensively investigated, the same cannot be said for the context of Bosnia and Herzegovina.

2.3 Porter’s Business Strategies Strategic management (SM) guides companies on creating, keeping, and enhancing the value to position themselves as competitive in the market. In this sense, SM is a critical tool for competitive intelligence, i.e., understanding and coping with the competition (Fuertes et  al., 2020). As explained in Phongpetra & Johri’s (2011) study, business strategy is a coordinated set of commitments and actions a company uses to gain a competitive advantage by exploiting core competencies in the specific product market. Hence, the overall goal of a business strategy is to outperform rivals on the market.

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Over time, different strategy concepts have been developed and accepted in the literature, but the most prominent typologies of business strategies are proposed by Miles et al. (1978) and Porter (1980) (Nandakumar et al., 2011). Allen and Helms (2006) argue that due to its “generality”, the most widely accepted generic business strategies among academicians and practitioners are the ones proposed by Porter. This especially due to the reason that the proposed typology overlaps with other typologies (e.g., with those proposed by Miles et al., 1978), and it is linked to various variables (e.g., organizational, environmental, performance) (AmoakoGyampah & Acquaah, 2008). The contribution to strategy modeling was in introducing a “difference”, i.e., emphasizing the importance of establishing the sustainable difference, specific for a certain company, which would allow it to stand out in the marketplace (Fuertes et al., 2020). The main characteristics of Porter’s generic business strategies (cost leadership, differentiation, and focus) are the following: 1. Cost leadership strategy: it aims to achieve cost leadership in the industry, for which purpose the focus is on the use of assets, on employee productivity, and discretionary expenses; 2. Differentiation strategy: the focus is on creating and offering a unique product/ service, meaning the company invests in its brand image, technology, engineering design, innovation, etc.; and 3. Focus strategy: choosing a narrow scope in the industry and selecting a specific market group for better service, either by creating a cost advantage (cost focus) or differentiating the target market (differentiation focus) (Phongpetra & Johri, 2011). In general, when opting for the business strategy, companies are driven by the ultimate goal  - to outperform the competition and gain better performance results (Fuertes et al., 2020; Ariyawardana, 2003).

2.4 Strategy-Performance Link Studies show empirical evidence that there is a positive and significant relationship between Porter’s competitive strategy and performance variables (Prajogo & Sohal, 2006; Fuentes et al., 2006; Solberg & Durrieu, 2008; Herzallah et al., 2013; Banker et  al., 2014). On the other hand, some studies demonstrate a significant negative relationship between Porter’s competitive strategy and financial performance (Herzallah et al., 2017). Besides, some do not support the assumption that competitive strategies directly influence a firm’s performance (Amoako-Gyampah & Acquaah, 2008). Companies opt for one specific business strategy (or a combination of strategies, although not advisable due to potential inherent contradictions of generic strategies), depending on their core industry and the overall environment in which they operate. However, Hlavacka et  al. (2001) have conducted a similar study on the sample of hospitals in Slovakia and found contrasting results that a hybrid

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implementation of strategies (i.e., the combination of cost and differentiation business strategy) brings superior performance results. On the contrary, some studies failed to support the claim that hybrid strategy implementation brings superior results. For example, the study of Tavalaei and Santalo (2019) conducted on a sample from the US airport industry, shown that the pure orientation towards a business strategy is associated with superior financial performance compared to the hybrid model (Tavalaei & Santalo, 2019). Similarly, the findings provided by Hansen et al. (2015) demonstrated no support for the hypothesis that firms that pursue hybrid strategy have better financial performance results (Hansen et al., 2015). Thornhill and White (2007) have performed a comprehensive analysis on the respective topic. According to them, most theorists, such as Porter, favor purity over hybrid strategies, as the orientation towards “purity” expresses the consistent and clear action against the competition. Although they are more complex in nature, hybrid strategies are vulnerable to competition attacks, more costly, and challenging to manage. Those are the reasons why they often result in poor performance (Thornhill & White, 2007). Their comprehensive study, conducted on a sample of 2351 organizations, shows that those pure strategies often provided better results than hybrid strategies. Variations are, however, observed in respect to specific industry sectors, such as manufacturing, construction, retail, and business services (Thornhill & White, 2007). It can be acknowledged that despite contrast results when it comes to the application of pure versus hybrid strategies, that all studies supported the hypothesis that there is a relationship between Porter’s generic strategies and business performance. Contradictory results may be attributable to different samples and environments, considering that each of referred studies has been conducted on a sample of a specific industry. Besides, some studies indicate unexpected conclusions, like the study of Amoako-Gyampah and Acquaah (2008). Namely, their hypothesis that competitive strategy directly influences a firm’s performance was not supported. However, it should be noted that, as the authors explained, these results might be attributable to the fact that performance results were tested only concerning the manufacturing area and not all firm’s functional areas (Amoako- Gyampah & Acquaah, 2008). In any case, despite the surprising results, this study is not inconsistent with the premise that there is a relationship between generic business strategies and business performance. Furthermore, Herzallah et  al. (2017) have focused on the relationship between competitive strategies and financial performance. Their results have shown a significant and positive relationship between cost leadership and differentiation strategies and financial performance. At the same time, there is a significant negative relationship between the focus strategy and financial performance. Latter results are unexpected since they are inconsistent with previous studies. Authors argue that surprising results are attributable on the one hand to the costly nature of focus strategy and on the other hand to the level of country development. Namely, they claim that focus strategy is costly since its successful adoption depends on employees’ experience and high devotion. At the same time, developing countries cannot afford such costly resources (Herzallah et al., 2017). Also, evidence suggests no significant correlation between the business strategy and business performance, e.g., between

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the cost leadership strategy and each of three performance variables (product quality, product innovation, process innovation) (Prajogo & Sohal, 2006). While speaking of the different context and their role strategy-performance link, MSMEs create an excellent surface for further debate. Keeping in mind that MSMEs as organizations tend to have a more flexible structure (Ratten, 2014) and tend to adapt quickly to the market changes, there is a need to investigate the role of strategic options in their overall performance. Considering the multidimensionality of business performance, we argue that two dimensions are vital for MSMEs. The first dimension is represented by financial outcomes whose significance and priority are undisputable. These measurements have a “paramount role in the productivity and efficiency of small and medium enterprises” (Matsoso & Benedict, 2016, p. 144). Eventually, all performance measures will be encompassed within the financial ones that determine the company’s overall success. In MSMEs characterized by a smaller pool of access to capital, primarily financial capital, their financial performance is considered a “blood pressure”. The strategic option that MSMEs take is largely determining their way of competing in the market and potential for financial success. However, Gunday et al. (2011) argued that financial performance is insufficient for MSMEs sustainability and that these enterprises have to look to non-financial indicators. The fact that strategy directs the overall business processes and procedure, the outcomes are firstly visible at the individual level. In particular, employees are the first that exhibit particular outcomes due to the changes in organizational characteristics (Koronios et al., 2020). In MSMEs, the relationship between strategy and different performance levels is even more pronounced as the organizational levels and hierarchy tend to be less distant. Because of this, Chadwick et al. (2013) argued that strategy development is a far dynamic process in small business settings since it encompasses both employees and customers. Considering the favorable relationship between Porter’s generic strategic and different dimensions of business performance and the unexplored area within MSMEs in B&H, we propose the following hypotheses: H1  In MSMEs, Porter’s generic strategies are positively related to financial outcomes, where: H1a. In MSMEs, cost leadership strategy is positively related to financial outcomes. H1b. In MSMEs, differentiation strategy is positively related to financial outcomes. H1c. In MSMEs, focus strategy is positively related to financial outcomes. H2  In MSMEs, Porter’s generic strategies are positively related to HRM outcomes, where: H2a. In MSMEs, cost leadership strategy is positively related to HRM outcomes. H2b. In MSMEs, differentiation strategy is positively related to HRM outcomes. H1c. In MSMEs, focus strategy is positively related to HRM outcomes. Figure 1 presents the conceptual model by incorporating proposed hypotheses.

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Fig. 1  Conceptual model

3 Methods 3.1 Participants and Procedure According to European Commission (2019), there are 66,145 MSMEs in Bosnia and Herzegovina. However, there is no public database of MSMEs at the national level, so we could not perform probability sampling. Therefore, convenience sampling was applied as a common technique in these situations (Vandekerkhof et al., 2019). As this study aimed to investigate the strategy-performance link, the respondents were managers of MSMEs. To collect primary data, a cross-sectional survey design was used. In particular, questionnaires were delivered personally to managers in print form accompanied with a cover letter explaining the purpose, asking for consent, and granting anonymity. The constructs were originally in English, and therefore, a back-to-back translation method was used to ensure content validity. After the data was collected, incorrectly filled surveys were eliminated. Besides, the main criterion for determining MSMEs was the number of employees, and all respondents from 250 and more employees were eliminated. As performance measurements were based on a period of 3 years, companies that had been in business for less have been excluded. The final sample included the responses from 108 managers. Among the respondents, most managers were from the service sector (52%), followed by manufacturing (17%) and trade (14%). The average age was 42, with 19 years of work experience and 11 years of tenure with the company. There were more male managers (71%), and most of the managers were high educated (74%). Finally, the average number of employees was 51, and 54% of managers were actual founders of the company.

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3.2 Instrument Design and Measurement The questionnaire contained five main constructs. Porter’s generic business strategies were measured using the adapted scales developed by Luo and Zhao (2004), consisting of 15 items. Namely cost leadership (CST) scale included five items, differentiation (DFN) included seven items, and three items referred to focus strategy (FCS). The focus strategy had four items on the original scale, but after validity tests, one item was dropped. By considering their main competitors, each participant has been asked to rate the degree to which their company focuses on several strategic options using the seven-point Likert scale (1 = very low, 7 = very high). To measure both financial (FINO) and HRM outcomes (HRMO), we used the scale adapted by Dyer and Reeves (1995). Financial outcomes were measured by a three-item scale, while a four-item scale measured HRM outcomes. Participants were asked to compare the particular performance aspects of an organization to its competitors based on a five-point Likert scale ranging from “1 = worse” to “5 = much better”.

4 Analyses and Results The data analysis was divided into two phases: pretesting and hypotheses testing. In pretesting, we conducted the reliability and validity (convergent and discriminant) analysis, descriptive statistics, and Harman’s single factor test. The results are presented in Table 4. The central tendency is reported through the mean (M) and variability through the standard deviation (SD) when it comes to descriptive statistics. The correlation matrix shows that correlation ranges from weak to strong. To test the reliability, we used Cronbach’s coefficient alpha (α) test. Results show that the constructs are reliable as they exceed the common threshold of 0.70 (Bekele et al., 2014). Since we used the existing constructs to test the data validity, a confirmatory factor analysis (CFA) was conducted. CFA showed that both the factor loadings of estimated parameters and average variance extracted (AVE) values were above 0.5. Therefore, we can conclude that the convergent validity for the constructs was reached. Table 4  Pretesting indicators FINO HRMO CST DFN FCS

M 3.73 3.91 4.63 4.50 4.84

SD 0.69 0.62 1.37 1.33 1.02

α 0.85 0.83 0.92 0.93 0.75

CR 0.85 0.83 0.92 0.93 0.77

AVE 0.66 0.56 0.70 0.69 0.53

FINO (0.81) 0.37** 0.44** 0.58** 0.19

HRMO

CST

DFN

FCS

(0.75) 0.05 0.22* 0.26*

(0.84) 0.80** 0.32**

(0.83) 0.41**

(0.73)

Note(s). N = 118. **p  0.8; and X2 /df = 1.723. H1 states that agreeableness personality trait positively and significantly influences firm performance among cultural entrepreneurs in Ghana. The results showed a positive and significant relationship (β  =  0.218, p   0.05). The relationship between agreeableness and acculturation was statistically insignificant in the study as well (β = −0.008, p > 0.05). The study also shows a positive and significant correlation between extraversion and acculturation (β = 0.384 p  0.05).

5 Discussion of Findings This paper sheds light on personality, acculturation, and firm performance among artisan enterprises in Ghana. We investigate how the personality traits such as agreeableness and extraversion of artisan entrepreneurs, affect their enterprise growth. We do this by measuring the go-through effect of cultural copiousness on these personality antecedents and performance. The assessment showed that agreeableness personality trait of artisan entrepreneurs has a direct effect on performance such that personal characteristic such as conformity and the artisan’s ability to defer to other people positively influences their output. This result is expected as previously indicated that an agreeable personality trait is conforming especially in cultural enterprises that operate on creativity (Dimitriadis et al., 2017). It is also shown in the literature that an agreeable personality trait of managers is directly related to the internationalization of their firm (Anwar et al., 2018). The implication of this is that artisan entrepreneurs who exhibit agreeable personalities have a higher probability of having an enhanced sales growth. We also find that extraversion is not directly associated with the performance of artisan entrepreneurship. Extraversion personality although predominantly found to lead to innovative behaviour and internationalization of firms (Anwar et al., 2018; Chiang et al., 2015; Araujo-Cabrera et al., 2017), is found to have no direct effect on artisan entrepreneurship performance. However, extraverted artisan entrepreneurs with an acculturation lifestyle are able to enhance their performance according to our findings. It is important that, this case in artisan entrepreneurship is further explored to understand the cultural antecedents that give rise to this special case. The relationship existing between extraversion and acculturation being found to be positively and statistically significant means that artisan entrepreneurs who are assertive, warmth, and active, have positive emotions, gregariousness, ambitious and sociable, and are more likely to learn more about other people’s way of life and perform its activities to their cultural settings. This finding is consistent with the findings of Wanberg et  al. (2000), Sanayei et al. (2016), and He and van de Vijver (2017).

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6 Implications and Conclusion We suggest that while artisan entrepreneurship is gaining significant prominence in entrepreneurship studies, practical cultural enterprise growth implications is needed to be applied to the sector especially in Africa where there seem to the dominance of cultural artefacts amidst porous regulations and structures. From the study, we conclude that personality traits are indeed salient to artisan entrepreneurship performance. We believe that artisanship is a craft of creativity and hence is mostly influence by the personal ideologies and innovativeness of the artisan. In this regard, artisan entrepreneurs should bear in mind that their ability to embrace several cultures is directly influential to their success. The trait of being agreeable enhances the performance of their enterprise. Artisan entrepreneurs who are extroverts and hence have a more dominant personality must adopt an acculturation lifestyle to enable them to achieve enhanced performance. We, therefore, conclude that artisan entrepreneurship offers hope for entrepreneurship development in Africa as forms part of its tourism bedrock a viable source of economic development. Development of the African literature is thus essential to expansion of the field. While our findings help, we call on more studies especially in the African context to further distend the artisan entrepreneurship literature.

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Empowering the Batak Toba Home Industry in North Sumatera: A Descriptive Study of Artisan Entrepreneurship Endang Purwaningrum, Ina Sukaesih, Petrus Usmanij, and Vanessa Ratten

Abstract  The traditional Batak Toba people live in a very famous tourism area namely Lake Toba and has a great opportunity towards the development as an international-­class tourism. Batak Toba people have a lot of uniqueness of the products they made, but ironically, they are less aware of the importance of forming a community business. This chapter outlines a descriptive study of artisan entrepreneurship in an attempt of empowering the Batak Toba people in developing home industry in North Sumatera, Indonesia. The Batak Toba tribe in its social life is inseparable from the name ulos. In addition to ulos, there are also other products that can be locally produced by the Batak Toba community. The chapter concluded that home-industry businesses surrounding Lake Toba have a great potential for further development through empowerment of the Batak Toba artisan entrepreneur in Batak land, especially surrounding Lake Toba. Keywords  Batak · Lake Toba · Entrepreneurship · Traditional village · Ulos

1 Introduction Enterprenuership is a driving force behind economic growth (Shumpeter, 1934 in Winardi, 2008) and it is a vital component in economic development especially in a developing country like Indonesia. Indonesia as a nation of diverse cultures and E. Purwaningrum · I. Sukaesih Politeknik Negeri Jakarta, Jakarta, Indonesia e-mail: [email protected]; [email protected] P. Usmanij (*) La Trobe University, Melbourne, VIC, Australia e-mail: [email protected] V. Ratten La Trobe Business School, La Trobe University, Melbourne, VIC, Australia e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 V. Ratten (ed.), Entrepreneurial Innovation, Studies on Entrepreneurship, Structural Change and Industrial Dynamics, https://doi.org/10.1007/978-981-16-4795-6_11

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traditions has a great potential in promoting entrepreneurial mentality and activity across the entire provinces, cities, regencies and the rural villages through various educational. The Indonesian Government should also promote an entrepreneurial program in an effort to improve the rural economic development so that the rural community is interested and motivated to be entrepreneurial, as well as to look for any profitable business opportunities. Furthermore, the Indonesian Government must be able to detect the community potential and expertise, in particular the management and industrial skills in order for this entrepreneurial program to succeed. The traditional Batak Toba people live in a very famous tourism area namely Lake Toba and has a great opportunity towards the development as an international-­ class tourism. The Batak Toba community still consciously maintains and preserves the customs of its ancestors of ancient times until today. Although the people have travelled to the entire archipelago and to other countries, they still religiously uphold their customs. Batak Toba people have a lot of uniqueness of the products they made, but ironically they are less aware of the importance of forming a community business. These products have a great potential to be developed and marketed which involve an important role of entrepreneurship. The peculiarities of Batak Toba ranging from food to traditional accessories that are not produced by other regions in Indonesia. Therefore, it is important to pay attention to this existing great potential by empowering the home industry of the Batak Toba villages to become an economic force of society by adapting to technological advances that have now penetrated into all areas of life of this community. This chapter outlines a descriptive study of artisan entrepreneurship in an attempt of empowering the Batak Toba people in developing home industry in North Sumatera, Indonesia. The study includes describing the rural villages, the rural community, the home industry, and how artisan entrepreneurship can empower the local home industry.

2 Study on Traditional Village Production The word traditional as we know refers to something old, outdated and very undated. Albeit this reference is not uncommon, we often forget that something traditional would be better preserved. What is a traditional village? Why is a rural village called traditional? A village is called traditional as it has the characteristics of an existing traditional village. A traditional village is a village where the people are still actively practicing the local customs and what their ancestors inherited. The word traditional itself originates from Latin word is traditum which means passed from time to time, from the past to the present (Gunawan, 2010). In a traditional village, the local customs are preserved and respected until today with the goal of being a wealthy community just like their ancestors when they lived in that village.

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2.1 The Village People The Batak Toba Area is located around Lake Toba which approximately 175 km from the capital city of Medan. This area is inhabited by the traditional Batak people of various clans which scattered across each region of the North Sumatera. For example, an area is inhabited by the Simatupang clan, while other clans we will not found in this area. Likewise, in an area of the Panggabean clan occupies an area where other class will not reside. There is also a clan or marga named the area or place where it is originated, for example, Marga Bakara which comes from an area called Bakara in the North Tapanuli region. The Pangaribuan clan derived from an area called Pangaribuan. There are also many other margas that do not indicate the area of origin of the clan, such as Marga Nababan. The Batak Toba tribe in its social life is inseparable from the name ulos. Ulos is a handwoven scarf that has been used for generations as one of the traditional accessories of the Batak people. Ulos is still considered a sacred object in the Batak traditional customs and used in different traditional celebration such as in matrimony and in traditional burial. Some other ulos can be worn by people in public. As summarized in an educational lecture website entitled Dosen Pendidikan (https://www.dosenpendidikan.co.id, 2021), there are a number of characteristics of the traditional Batak Toba people that the authors include in this chapter. Firstly, the Batak Toba people strongly uphold the tradition. Despite so many traditions in Indonesia have evolved hand-in-hand with the social life of the modern community, the Batak Toba people are totally the opposite. Social status, place of residence, wealth and educational background do not seem to change the characteristics of the Batak Toba people to follow the changes of characters in other Indonesia tribes living elsewhere. This is evidenced in how the Batak Toba people are still practicing their traditional customs as their ancestors did in the past. Ceremonial activities such as birthday, matrimony, religious related activities and burial are still celebrated in this community.

2.2 The Home Industry Agricultural farming is a homogenous occupation of the Batak Toba people and the majority of farmers grow coffee tree plants due to geographic reason (Parulian Siagian et  al., 2017). However, the information and communication technologies (ICT) disruption in this area has made the people living around Lake Toba have a great business opportunity to grow through good entrepreneurship. The local people at Lake Toba are currently benefiting from the ICT technology and the breakthrough of WhatsApp and Instagram. In the Toba area there are many commodities that the city people do not have and that can be further developed with small-scale capital. The businesses that can be developed as home industry for local traditional market consumption have now had an opportunity to be converted into small businesses due

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to limited capital. However, the Batak Toba people are open to external funding support from banks or other financial institutions. The revenue generated by this business model is intended to empower the local home industry and to increase the people’s income. The fundamental principle of this business is trust on the quality of the product and good customer service. There are a number of home industry enterprises that have been developed including the production of ulos which has various functions and philosophical meaning within it (https://fitinline.com, https:// www.kainpusat.com). For instance, ulos is not an ordinary handwoven scarf but also has its own meaning among the Batak society. Each ulos has a distinctive meaning and way of use that associated with cultural values for the Batak people. Ulos can also be used in daily life activities depending on its types. Certain types of ulos are treated as souvenirs of the Batak Toba. Therefore, the development of ulos production in the traditional society can be developed further as a promising home industry. It is quite common that the artists that produce ulos are all female who use their spare time during the day while not going to the farm or in the evening in to make ulos in diverse patterns. There are different types of ulos that can be produced as entrepreneurial commodities. Table 1 shows a summary of different types of ulos that the authors collected from online marketing. Ulos Padang Ursa is used as baby carrying bag or parompa in Batak language which has been one entrepreneurship commodity of the Batak Toba people. Ulos Bintang Maratur symbolises happiness and is used in a tradition called mangulosi which means to give ulos to someone. Ulos Bintang Maratur replaces ulos Mangiring and can be used by anybody. Ulos Antak-Antak is the one that symbolised mourning or grievance, usually comes in black, and is worn in funeral or burial. Non Batak people also wear this to show respect to the family members of the departed. In the recent development, ulos Antak-Antak has been produced for tourism industry as souvenirs. Ulos Bolean, like Antak-Antak, is also worn to show grievance and respect to the family members of the departed. Ulos Ragi Huting is intended for a Batak girl and must be worn by wrapping it around the chest. This ulos is thick like wool and suitable for outfit in the cold area surrounding Lake Toba. Ragi Huting is rarely produced now and it has been replaced by modern scarves. Ulos Pinan Lobu-Lobu is worn by the Batak people as scarves as it has aesthetical value yet flexible in use. Normally it is worn in a traditional wedding ceremony. It can also be worn as accessories. Ulos Ragi Hotang is the most commonly used cloth by the Batak people. It can be a wedding gift in the Batak wedding ritual or used as parompa. Ulos Pinuncaan is the most expensive cloth in the Batak community. It consists of five separated weaving segments that stitched together as one. It can be worn to show happiness or in mourning, and can be used as wedding gift or as souvenirs. Ulos Tumtuman has a typical Batak Toba pattern that is called tumtuman and has become the icon of Batak. It can be worn as head bandana called tali-tali by the bride’s family members or the hasuhutan. It can also be a wedding gift or souvenirs. Ulos Ragi Pakko is wide and rather thick as it can be used as a blanket. It can be

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Table 1  Ulos and its usage No. Name of ulos 1. Ulos Padang Ursa 2. Ulos Bintang Maratur 3. Ulos Antak-­ Antak and Ulos Bolean 4. Ulos Ragi Huting

Online source http://fitinline.com

5.

Ulos Pinan Lobu-Lobu

http://fitinline.com

6.

Ulos Ragi http://fitinline.com Hotang Ulos Pinuncaan http://fitinline.com

7.

8.

Ulos Tumtuman

http://fitinline.com https://tenun.id

http:// ulosindonesia.com

http://fitinline.com

9.

Ulos Ragi http://fitinline.com Pakko and Ulos https://www. Ragi Harangan pariwisatasumut. net 10. Ulos Suri-Suri https://www. Ganjang obatak.id

Explanation It is used as parompa or a baby carrying bag or as a souvenir It is a symbol of happiness and has a universal meaning It is a symbol of mourning and grieving and is used in funeral service. The colour is black It is used by Batak girls and is wrapped around the chest. When used by elderly people while travelling, they will wrap it around the neck as a scarf to keep their body warm. It is rarely found today but can still be made to preserve the culture and the ancestral habits It is often worn by the Batak people as a scarf and has an aesthetical value. It can be used in wedding or as souvenir It is most frequently used by the Batak people as wedding gifts or as parompa It is the most expensive ulos and has five separate parts that is stitched together. It can be used in any occasions or as a gift It is one with specific pattern which has been made as Batak icon and can be used as head bandana by the hasuhutan (the bride’s family) or as a gift It is a thick and wide ulos that can be used as a blanket and anyone can us it

Is used in mangulosi the bride

Source: Developed by authors

used universally by its owner but in particular by the bride in the wedding ceremony. Ulos Ragi Pakko is similar to ulos Ragi Harangan. The last one is ulos Suri-Suri Ganjang which is used in fashion industry or combined clothing. In the latest development, this ulos can be framed and hung on the wall. It can also be used as curtain or backdrop of the aisle chair. Suri-Suri Ganjang can also be used in mangulosi or covering the bride with ulos. This ulos is also called ulos Gabe-Gabe. In addition to ulos, there are also other products that can be locally produced by the Batak Toba community. Local snack producer MSMEs have launched various authentic Batak snacks in the surrounding tourism areas (https://makananoleholeh. com). There are many kinds of confectionery that can be purchased by tourists as souvenirs. This is a business that highly sustainable and can be easily developed anywhere, at any time on any capital scale. This typical Batak food is produced by housewives from home. Therefore, the producers can market the products in front

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of the house without having to rent a kiosk on the side of the road. Additionally, the products can be marketed online. The opportunity for home food businesses in the Batak Toba villages will alleviate as the packaging and promotion are professionally improved. The second other product is the authentic Batak batik paintings (https://merahputih.com). The Indonesian Government has long declared that each region has its own batik. Similarly, batik in the Batak area has a distinctive pattern that is ready for market, both offline from the souvenir shopping center and via online. The Batak batik can be in the form of mass-produced printing the factories or produced by home-industry MSMEs in the forms of hand-painted batik and stamped batik. The Batak batik has its own uniqueness in pattern and has a high potential to empower the home industry in Batak Toba area. The third other product is the Batak accessories and other souvenirs. (https:// jejakpiknik.com). Souvenirs are products of home industry and has a great potential to grow in almost every village surrounding Lake Toba. The souvenirs are unique and can be marketed in the same shops that sell batik and ulos or online. Beads or so-called mutu manikam are original handmade products by Batak girls. The beads are still made in a small production scale and still need to be converted into a competitive home product. This beads business has increased the income of the Batak women who work in the beads home-industry, and who promote the Batak famous land famous by working as a tour driver for tourists when visiting the exotic Lake Toba. Interestingly, the Batak women also look after the beauty of Lake Toba to remain as one of the internationally targeted tourist destinations in Indonesia.

2.3 Entrepreneurship Education for Community Empowerment Entrepreneurial education is understood as a process in developing target groups (individuals or groups) into creative, innovative and productive people who are able to find solutions to problems faced by using resources in their environment, both social resources and natural resources. Entrepreneurial education can be formal and non-formal. Martin et al. (2013) stated that formal entrepreneurship is considered to be one component of human capital that may support the buildup of the entrepreneurs’ competencies, and universities are the main host (Hahn et al., 2017). Non-formal education, on the other hand, is institutionalized, intentional, and planned by an education provider, is considered an addition, alternative, and/or complementing formal education within the process of the lifelong learning (Debarliev et  al., 2020). UNESCO defined non-formal education as the one that caters to “people of all ages but does not necessarily apply a continuous

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pathway-­structure; it may be short in duration and/or low intensity, and it is typically provided in the form of short courses, workshops, or seminars”. Non-formal entrepreneurship education in Indonesia can be in the form of training of technological advances and counseling, so that the community can quickly coupe and adapt. The main objective is to encourage community creativity, innovation and awareness there will create business opportunities to the community (Sukidjo, 2021). In this chapter, the authors have selected a series of possible suggestions for implementation of the non-formal entrepreneurship education dedicated for entrepreneurs of Lake Toba listed out in the following dot points: • Entrepreneurial education that is easy to understand by the community. • Product packaging training must start with simple packaging, such as making a typical Batak tote bag and paper bag for wrapping every purchase. People can be trained to make paper bags with patterns and distinctive shapes of the Batak icon coated with ulos-patterned fabric. • Carving training of traditional souvenirs such as Gorga patterns for young people by carving experts and artists. • Training on making accessories or trinkets such as typical Batak beads. • Development of ulos making using looms instead of high-tech machines. • Development of food production with sealing packaging for fresh foods and attractive packaging for dried foods of Batak snacks. • Barista training for ready-to-brew or ready-to-eat coffee and its waterproof, attractive packaging. • Redesigning residential houses into residential and shops for displaying and marketing their products. • Establishing MSME villages and tourism villages by turning people’s houses into MSME shopping centers • Workshop on the importance of a joining cooperation in order to easily obtain funds as working capital. • Include banks to become the adoptive father for community owned MSMEs. • Provide online marketing training. In order to support a solid formation in empowering villages and to strengthen the people’s economy, as well as to make Lake Toba a tourism village that supports government tourism programs, various training and mentoring programs for the community must be deployed. The steps that the local government agencies can initiate is in developing innovation and in growing creativity of the community, and to create such business climate that encourages people to produce and actively market their products, both online and offline. The souvenir shopping center is the offline store that sells the home industry product from every house surrounding Lake Toba.

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3 Conclusion The above-mentioned businesses are home industry that have a great potential for further development in Batak land, especially surrounding Lake Toba. Moreover, with the support of online marketing, the opportunity to empower people from the entrepreneurial side will be a great help in increasing people’s income. It is also considering that the Lake Toba tourism area has a great potential to be developed into an international tourist target. The people of Lake Toba really need to prepare themselves to support this initiative. By empowering the community around Lake Toba, the government tourism programs in this area will be a successful one through building up the entrepreneurial spirit within the community at one hand, and to increase their income on the other.

References Aneka Souvenir Khas Batak in https://jejakpiknik.com as accessed on the 30 May 2021. Aziz, N. Kain Tenun in https://tenun.id as accessed on the 26 May 2021. Batik khas batak in https://merahputih.com as accessed on the 30 May 2021. Ciri-ciri Masyarakat Tradisional Batak Toba in https://www.dosenpendidikan.co.id as accessed on 30 May 2021. Debarliev, S., Janeska-Iliev, A., Stripeikis, O., & Zupan, B. (2020). What can education bring to entrepreneurship? Formal versus non-formal education. Journal of Small Business Management. https://doi.org/10.1080/00472778.2019.1700691 Gunawan. (2010). Ciri-ciri Masyarakat Tradisional in http://nilaieka.blogspot. com/2%2D%2D9/04/ciri-­ciri-­masyarakat-­tradisional.html as accessed on the 30 May 2021. Hahn, D., Minola, T., Van Gils, A., & Huybrechts, J. (2017). Entrepreneurial education and learning at universities: Exploring multilevel contingencies. Entrepreneurship & Regional Development, 29(9–10), 945–974. https://doi.org/10.1080/08985626.2017.1376542 Jenis-jenis Kain Ulos Batak Lengkap dengan Fungsi dan Makna Filosofi yang Terkandung di dalamnya in https://fitinline.com as accessed on the 30 May 2021. Kain ulos: Sejarah, macam-macam dan fungsi in https://www.kainpusat.com as accessed on the 31 May 2021. Martin, B.  C., McNally, J.  J., & Kay, M.  J. (2013). Examining the formation of human capital in entrepreneurship: A meta-analysis of entrepreneurship education outcomes. Journal of Business Venturing, 28(2), 211–224. https://doi.org/10.1016/j.jbusvent.2012.03.002 Parulian Siagian, P., Setyawan, E. Y., Gultom, T., Napitupulu, F. H., & Ambarita, H. (2017). A field survey on coffee beans drying methods of Indonesian small holder farmers. 1st Nommensen international conference on technology and engineering, IOP conference series: Materials science and engineering 237. IOP Publishing. https://doi.org/10.1088/1757-­899X/237/1/012037. Sukidjo, S. (2012, April). Peran Pendidikan Kewirausahaan Dalam Pemberdayaan Masyarakat Miskin di Indonesia. Jurnal Economica, 8(1). https://jurnal.uny.ac.id as accessed on the 26 May 2021. Ulos Ragi Harangan in https://www.pariwisatasumut.net as accessed on the 26 May 2021. Ulos Ragi Huting in http://ulosindonesia.com as accessed on the 26 May 2021. Ulos Suri-Suri Ganjang in https://www.obatak.id as accessed on the 26 May 2021. Usaha Makanan kecil khas Batak Toba in https://makananoleholeh.com as accessed on the 26 May 2021. Winardi, J. (2008). Entrepreneur dan Entrepreneurship. Raja Grafindo.

Muslimpreneur: Entrepreneur Potential Characteristics in Indonesia as the Country with the Largest Muslim Population in the World Hanny Nurlatifah, Asep Saefuddin, Marthin Nanere, and Vanessa Ratten

1 Introduction Most of us would think that Muslimpreneur is a Muslim who carries out commercial activities. This assumption is not completely correct. Muslimpreneur here is a Muslim or non-Muslim carrying out commercial activities by following the values exemplified by the Prophet Muhammad SAW, which makes the essence of the term of muslimpreneur. We take the example of a fruit trader, both on the market and on the side of the road. The merchant is a Muslim and the goods are sold halal, but for the sake of greater profit, the merchant consciously cheats by outsmarting the scales so as to harm the buyer, so we cannot call the merchant as “Muslimpreneur” even though he is a Muslim because the merchant is doing business that is not in accordance with the values practiced by the Prophet Muhammad SAW. Even though we know that the Prophet Muhammad SAW is the Messenger of Muslims, the values that are practiced in conducting commerce are universal so that they can be applied even by non-Muslims. We believe that outside of religious spiritual activities, non-Muslims who apply the values practiced by the Prophet Muhammad can be called as Muslimpreneur. Muhammad Najikh is an entrepreneur who started his business in the field of fisheries. His products have successfully entered the global market. His company is PT.  Kelola Mina Laut has exported to 30 countries including Japan, the United States, the European Union, Canada, Russia, Singapore, China, South Korea, H. Nurlatifah · A. Saefuddin University of Al Azhar Indonesia, Jakarta, Indonesia M. Nanere · V. Ratten (*) La Trobe Business School, La Trobe University, Melbourne, VIC, Australia e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 V. Ratten (ed.), Entrepreneurial Innovation, Studies on Entrepreneurship, Structural Change and Industrial Dynamics, https://doi.org/10.1007/978-981-16-4795-6_12

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Australia, Thailand, New Zealand and many more. Najikh started the fish export business, which initially did not have adequate capital such as money and factory assets. The main capital he has is his knowledge and experience after working in a fisheries company, namely access to the source of raw material networks and knowledge of the processing technology. The first buyer of the Najikh product is a Japanese company that believes in Najikh because it is considered to have a good track record. Najikh has succeeded in convincing buyers and even Japanese companies provide capital to Najikh to establish a processing factory, so that it can eventually enter the global market because it is considered to have values in business (Diredja, 2020). In doing business activities, Najikh has a productive, creative and innovative mindset. He always thought independently and if he got a problem he chose to face and look for a solution to solve the problem instead of complaining and looking for reasons. According to him, entrepreneurship must have good intentions to help and prosper the community. So it is expected that we will get the values of the activity. The more people we help, the greater the effort goes forward and develop, this is because many people pray for us (Diredja, 2020). Muhammad Najikh is an entrepreneur who has a Muslimpreneur characteristic. Anne Avantie is known as a fashion designer in Indonesia. The distinctive feature of the design is that the Kebaya is of high quality and is well known to foreign countries and is very popular with celebrities. Even though the price is high, the products always sell well in the market. In addition to doing business, Anne Avantie also has a high level of social care, through the foundation she founded; she is active in helping cancer sufferers and children with special needs. The interesting thing is that Anne has been active in helping and establishing a foundation since 20 years ago. Before her business was successful, she believed that to help people do not need to be rich (Puspita Sari, 2020). Anne Avantie is not a Muslim but outside of her religious spiritual activities she has applied Muslimpreneur values. Therefore, she is Muslimpreneur. Through the literature review method and using published secondary data such as research reports, offline media and online media, this article will focus on discussing the Muslimpreneur model which has the potential to characterize entrepreneurs in Indonesia as a country with the largest Muslim population in the world and in the framework of value creation which is expected to become the basis for an appropriate marketing strategy for MSMEs, especially at the global level with an approach to consumer behavior during the Covid-19 pandemic.

2 The Impact of Covid-19 Pandemic on the Economy The COVID-19 pandemic that has hit the world has had a tremendous impact not only on health but also on the economy, starting from China which then spread rapidly to almost all over the world including Indonesia. Economically, the impact of the COVID-19 pandemic has caused a recession, one by one countries in the world such as Singapore, the United States, Germany, France, Italy, South Korea,

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Hong Kong, the Philippines have officially announced a recession. A recession occurs because a country’s economic growth is negative for two consecutive quarters. Indonesia’s economic growth in the second quarter of 2020 was negative 5.32% (Badan Pusat Statistik, 2020). If in the third quarter the economic growth returned to negative, it is certain that Indonesia will experience a recession. The impact of the COVID-19 pandemic on the world economy occurred due to the existence of a social restriction or lock down policy which in Indonesia is known as large-scale social restrictions (PSBB) resulting in disruption of supply and demand which are the most important aspects of an activity the economy. Looking at economic growth data until the middle of the third quarter of 2020 Indonesia has not experienced a recession, but due to this pandemic the impact can already be seen such as increased unemployment due to layoffs that are higher than the employment rate, as of 27 May 2020 formal sector workers who have been dismissed have reached 1,058,284 workers (Biro Humas Kemnaker, 2020). While the most affected sector due to the Covid-19 pandemic is MSME or small and medium enterprises. This crisis was different from the economic crisis that had hit Indonesia in 1998 where at that time the MSME sector was most resistant to the crisis, but the crisis that occurred this time was precisely the SME sector which became the most vulnerable sector affected. During the COVID-19 pandemic, there was a decline in sales of 94.69% of MSME business units (LIPI, 2020). The number of SMEs in Indonesia as of 2018 is 64.199 million business units contributing 99.9% to the total national business units, absorbing 120.598 million jobs, contributing 97% to total national employment and producing gross domestic product (GDP) at the current price of 8,573,895 trillion rupiah which contributed 61.07% to the total GDP (KemenKUKM, 2018). Due to the very large number and value of transactions, the decline in sales of the MSME sector as a result of the impact of the COVID-19 pandemic has significantly affected national economic growth.

3 Consumer Behavior Amid the COVID-19 Pandemic For marketers who want to sell a product or service, it is very important to understand consumer behavior. Success in creating demand is inseparable from success in understanding consumer behavior. Consumer behavior is the behavior shown by people in planning, buying, and using economic goods and services (Winardi, 1991). Marketers are obliged to understand consumers, know what consumers need, what consumer tastes are, and how consumers make decisions (Sumarwan, 2017). Motivation is one of the factors that influence consumer behavior, motivation is an inner drive (or need) that moves a person to take a purchase action to satisfy two types of desires, namely core desires and secondary desires. (Ramya, 2019). In consumer purchasing decisions, it is influenced by three perspectives, namely: rational perspective, experiential perspective and behavioral perspective (Babin & Harris, 2011). Marketing is a process of how to identify consumer needs and convince consumers that they need these goods and services, by understanding

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consumer behavior properly will help marketers develop the right marketing strategy (Sumarwan, 2017). The COVID-19 pandemic is causing changes in social behavior globally. During the COVID-19 pandemic, especially after the implementation of social restriction policies (lock down) in various countries in Indonesia, known as Large-Scale Social Restrictions, caused sudden social changes. Social change is then followed by changes in consumer behavior that are reflected in purchasing decision making. Social restriction policies (lock down) in various countries have caused shock to loyalty to consumer behavior due to disruption of the supply chain so that the product brands that consumers always choose become difficult to find, during the pandemic consumers will try products with different brands, which is the main driving force for consumers to trying different brands is besides value and quality; product availability (Arora, 2020). In the period before the COVID-19 pandemic, in a rational perspective, consumer purchasing decisions would rationally consider carefully, price aspects, and best features and services of a product will be the main consideration in making a purchase decision. From an experiential perspective, purchasing considerations are based on unique experiences such as watching movies, consumers going to the cinema or listening to music, consumers will prefer to listen to the singer directly at a music concert. Consideration of purchasing decisions from a behavioral perspective is a response to environmental influences. To enjoy food and drinks, consumers prefer to go to a restaurant or café because they want to enjoy a calm and comfortable atmosphere or sit longer while working and meeting business partners. In this COVID-19 pandemic, the various perspectives above have changed; consideration of purchasing decisions during the COVID-19 pandemic is based more on functional aspects. According to a study conducted, many consumers around the world continue to experience a decline in income so that they prioritize their expenditure on basic necessities and household supplies. Consumers will be more careful in considering each stage of the purchase decision because of the associated health risks and social distancing situations. In various countries consumers decide where to shop by looking for retailers that appear to be implementing health safety standards (Arora, 2020). The COVID-19 pandemic has caused a new normal life order. In the new normal life order with the excuse of avoiding physical contact that is at risk of COVID-19 transmission, consumers prefer to make purchases online. Anxiety about the risk of transmission causes people to tend to avoid direct contact. To get products during the COVID-19 pandemic, people prefer to purchase online, so the most appropriate marketing channel is online sales. In markets that had moderate online conversion rates before the pandemic such as the United Kingdom and the United States, e-commerce during the pandemic continued to grow in all product categories (Arora, 2020). Meanwhile, during the pandemic in Indonesia there has been a 400% increase in online shopping (CNN Indonesia, 2020). Based on the same feelings at the time of the COVID-19 pandemic, the community became increasingly empathetic. Empathy is a mental state that makes a person feel or identify himself in a state of feeling or mind that is the same as another

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person or group (KBBI, 2020a). Because the more empathy, society becomes more and more concerned about others and the value of collectivism will grow to affect consumer behavior, the value of collectivism implies cooperation, help and consideration of common goals rather than individual goals (Lacroche et al., 2002). During the pandemic consumers in various countries buy more products from companies that show concern and care for their employees because during difficult times during the pandemic consumers have a high awareness of how businesses interact with stakeholders, local communities and communities, this consumer action after the pandemic is most likely will continue to be remembered (Arora, 2020). The high uncertainty during the COVID-19 pandemic has caused anxiety that has resulted in people getting closer to God. The crisis caused by the COVID-19 pandemic has affected one of the most basic human behaviors namely Religion where people pray to overcome uncertainty and hardship (Bentzen, 2020). This behavior occurs globally because according to research conducted by J.  Bentzen using daily data on Google searches in 95 countries shows that the crisis caused by the COVID-19 pandemic has increased Google searches for prayer to the highest level ever recorded, by the end of March 2020 more than half of the world’s population has prayed for an end to the pandemic (Bentzen, 2020). According to a survey conducted by McLaughlin & Associates, it shows that in the United States millions of people have become religious or have returned to God’s way in the midst of the COVID-19 pandemic and think that the coronavirus crisis that occurs is a sign that everyone returns to God (Ariyanti, 2020). Religious is something that is religious in nature (KBBI, 2020b). As a character value, religion is an attitude and behavior that is obedient in carrying out the teachings of the religion it adheres to, is tolerant of the implementation of the worship of other religions and lives in harmony with followers of other religions (Suparlan, 2010). Changes in people’s behavior that are increasingly religious are very important in understanding consumer behavior because the rules in each religion are one of the things that affect consumer behavior (Sumarwan, 2017). In the context of the world of consumption, religious obligations and beliefs direct people’s attitudes and feelings towards various products, such as food products, finance, cosmetics and pharmaceuticals (Mukhtar & Butt, 2012). The COVID-19 pandemic could permanently increase religiosity which in turn has an impact on the economy at large (Bentzen, 2020). Consumer purchasing decisions during the COVID-19 pandemic will consider the hygienic factor more. According to Tamsyn Burgman the increase in awareness of halal is associated with religion and the belief that it is cleaner, healthier, and tastier (Aziz & Chok, 2013). In the new order (new normal) Halalan Thayyiban will become mainstream (Yuswohady et al., 2020). The concept of halalan thayyiban is the concept of food and drink, halal is something that is allowed and legally obliged to be consumed by Muslims, while thayyiban means good in terms of meeting medical and health standards (Nuraini, 2018).

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4 Perspectives of the Muslimpreneur Model Amid the COVID-19 Pandemic The concept of Muslimpreneur is a concept of entrepreneurship which adopted from the Prophet Muhammad SAW as an entrepreneur. The Prophet Muhammad SAW was a successful entrepreneur, from childhood he was trained to help his uncle’s small business then was involved in trading activities and eventually became a successful trader in the city of Mecca (Kelana, 2008). This concept that has been practiced by the Prophet Muhammad SAW thousands of years ago is in line with the current concept of developing entrepreneurship because the Muslimpreneur concept emphasizes value creation. Traditional theory of entrepreneurship focuses primarily on identifying new opportunities (new business opportunities) while currently developing theories focus on value creation (Kim et al., 2018). The Muslimpreneur concept also emphasizes the importance of ethics in doing business (business ethics) and always innovating. Islam always encourages its people to become innovative and active entrepreneurs, doing business ethically is an important thing that must be practiced by all entrepreneurs, especially Muslimpreneurs. (Rameli et al., 2014). The model of this Muslimpreneur concept has four main elements where the peak is spiritual activation, three other elements are religious foundation, human and nature interaction and moral guidance (Nurlatifah et al., 2019). The Muslimpreneur model above is in line horizontally (hablu minannas) with the concept of Humanepreneur. The concept of the Humanepreneur concept describes a horizontal relationship or relationship between humans (Kim et  al., 2018). The concept of Muslimpreneur complements the concept of Humanpreneur with a vertical relationship (hablum minAllah) or the relationship between humans and God. The Muslimpreneur model is universal because the research process emphasizes how to embed the Muslim model in the entrepreneurial innovation process so that it can be applied by anyone and not limited to Muslims (Nurlatifah, 2019). Although the Prophet Muhammad SAW is the Messenger of Muslims, the concept of Muslimpreneur is universal and can be applied to other than Muslims. Islamic attributes in Muslimpreneur are perspectives related to belief and submission to God (Guemuesay, 2015). Hermawan Kartajaya (Founder & Chairman of MarkPlus. Inc.) and Professor Philip Kotler (Kellogg School of Management) wrote the book Marketing 3.0 inspired by the way the Prophet Muhammad SAW conducted business (Nurlatifah, 2019). The Perspective of the Muslimpreneur Model is relevant in the midst of the COVID-19 pandemic. While religious foundation elements are related to optimism, this COVID-19 pandemic creates anxiety and uncertainty because no one can predict with certainty when the pandemic will end, the only way to reduce anxiety is to surrender to Him. The best way to prevent transmission of COVID-19 is to maintain cleanliness and choose good (hygienic) food sources. One of the variables of spiritual activation is halalan thayyiban, the principle of halalan thayyiban guarantees a good food source (hygienic) this principle becomes very important not only to fulfill

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religious spiritual obligations. Within the element of moral guidance, there is a fair trade variable which must uphold ethics in doing business. During this pandemic there are many opportunities for great gain, but it is unethical to take great advantage over the difficulties of others. In a pandemic situation, empathy is needed because a lot of people are experiencing difficulties, concern for welfare, which is a variable of the human and nature interaction element, emphasizes the obligation to care for and help others.

5 Muslimpreneur as Brand Values in Establishing Marketing Strategies Even though it is based on the principles and rules of the Islamic religion, Muslimpreneur is a brand value that can become a universal brand image; this brand image is not only to attract Muslim consumers but also has the potential to attract non-Muslim consumers. Brand image is the perception and belief held by consumers, as reflected in the associations embedded in the minds of consumers (Kotler & Keller, 2009). It is also said by Ferrinadewi (2008) that brand image is a concept created by consumers for subjective reasons and personal emotions. Religious brand image is described as a social phenomenon related to consumers in choosing the meaning of a brand according to their religion which is generally based on religious principles and rules. Religious signs, terms, and language are part of this brand image (Idris et al., 2018). The Muslimpreneur model as a brand image is based on Islamic principles and rules. Islamic marketing is a new thing and is widely discussed by marketing experts, to attract corporate consumers to compete to form a brand image that is in accordance with Islamic sharia. (Idris et al., 2018). Many companies that apply Islamic sharia disclose that their customers are not only Muslim such as Marhaba, a company that sells cakes and chocolates based in the Netherlands, a quarter of its customers are non-Muslims, as well as at Hotel Jawhara, Arabian Gulf, it turns out that 60% of its customers are non-Muslims. The reason they are interested because of the quietness of the hotel and the friendly atmosphere like a family (Power & Abdullah, 2009). The components of the brand image consist of a corporate image, a user image and a product image (Simamora, 2004). Muslimpreneur is a component of corporate image that contributes to creating positive values that will become the brand image of the company. This brand image has a significant influence on purchasing decisions because consumers will perceive that company activities ranging from product manufacturing, product packaging, product promotion and distribution will be ethical, responsible and religious. Perceptions of ethics and responsibility greatly influence brand loyalty because with advances in information technology the world becomes connected and transparency becomes a necessity. In a connected world truly ethical behavior will be necessary to succeed in any marketplace so managers must promote ethical behavior in companies (Singh et al., 2012).

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Seeing consumer behavior during the COVID-19 pandemic, the Muslimpreneur brand values can be the basis for a marketing strategy for companies, especially MSMEs, in entering the market, especially the global market in a new normal post-­ COVID-­19 pandemic. Marketing strategy is a fundamental tool planned by the company by developing a sustainable competitive advantage through the entered market (Tiptono, 1997). With increased empathy due to the COVID-19 pandemic, building a brand that has high concern, empathy and love is now a powerful marketing strategy tool. By providing solutions to the difficulties experienced by society, the company will gain a reputation as a responsible and empathetic brand (Yuswohady et  al., 2020). In the midst of the COVID-19 pandemic, people are becoming increasingly religious, the right marketing strategy is to create a brand that has religious values, by adding spiritual value/benefit to its value proposition, a brand can create a spiritual connection with consumers and in an increasingly religious society, the brand must be a solution for consumers by providing peace of mind (Yuswohady et al., 2020). Muslimpreneur’s brand values are related to the halalness of the product because one of the variables of spiritual activation is halalan thayyiban. The increasing level of halal awareness among Muslims causes the need for halal products to increase. The prediction of halalan thayyiban to become a mainstream will cause products with halal labels to be a priority in purchasing decisions. Halal products are also predicted to be increasingly in demand by non-Muslims because products with a halal label are considered to be able to guarantee the cleanliness and hygiene of the product. Consumers in various countries buy more from companies that have healthy and hygienic packaging brands (Arora, 2020). Long before the COVID-19 pandemic in the United States, along with consumer awareness of halal products, the demand for halal products by Jewish and Christian consumers increased because of the interest in the concept of halal products, namely cleanliness, purity and goodness. (Alserhan, 2010). The right marketing strategy for UMKM products is to carry out a production process, especially food products according to the rules of halalness, and complete it with a halal certificate.

6 Conclusion The sector most affected by the COVID-19 pandemic is the MSME sector or Micro, Small and Medium Enterprises. During the COVID-19 pandemic, 94.69% of MSME business units saw a decline in sales. Due to the very large number and value of transactions, the decline in sales of the MSME sector due to the impact of the COVID-19 pandemic has significantly affected national economic growth. Based on the same feelings at the time of the COVID-19 pandemic, the community became increasingly empathetic. The high uncertainty during the COVID-19 pandemic has caused anxiety that has resulted in people getting closer to God. Consumer purchasing decisions during the COVID-19 pandemic will consider

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hygiene and hygiene factors more. The level of public halal awareness will increase because halal products are considered to guarantee this factor. According to data released by the PEW Research Center, the world’s Muslim population is currently 1.9 billion or 24.9% of the world’s population. It is estimated that there will be an increase in the next decade or by 2030 Muslims will become 2.2 billion or 26.4% of the world’s population (Pew Research Center, 2011). The size of the global Muslim market in the halal food, pharmaceutical and halal lifestyle sectors according to a report from the State Global Islamic Economy Report (State of the Global Islamic Economy Report, 2019) is estimated to be worth USD 2.2 trillion in 2018 and has the potential to grow to USD 3.2 trillion by 2024. The population of Muslims in the world is expected to continue to increase. The expenditure of 1.8 billion Muslims in the world or 24% of the world’s total population which reaches USD 2.2 trillion starting from food, medicine and lifestyle is influenced by the needs and ethical values of Islamic teachings (Suryowati, 2020). Indonesia itself is currently the country with the largest Muslim population in the world which has the potential to have characteristics as a Muslimpreneur. Seeing consumer behavior during the COVID-19 pandemic, Muslimpreneur brand values can be the basis for a marketing strategy as a fundamental tool planned by the company by developing sustainable competitive advantages for companies, especially MSMEs in entering the market, especially the global market in a new normal post-­ COVID-­19 pandemic.

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Micro Small Medium Enterprises (MSMEs) and Indonesian National Economies During and Post COVID-19 Rahmadi Sunoko, Asep Saefuddin, Marthin Nanere, and Vanessa Ratten

1 Introduction As an archipelago country with population reaching 270.2 million, Indonesia is predicted to become a considerable economic drive in Asia-Pacific region (Oberman et al., 2012). This can never be achieved without the natural resources of Indonesia. Administratively, Indonesia consists of 34 Provinces with 514 regalities and cities. The population of Indonesia distributed in 71,074 villages/districts, geographically 78.69% lie on the flat, 17.51% lie on the slope and 3.80% lie on the valley. With this geographical condition, only 15.32% villages/districts lie on the coastal and the remainder 84.68% lie on non-coastal area (BPS, 2021a). However, the concentration of population is mostly in the coastal region especially in Java. This demographical condition reflects Indonesian economic robustness. This can be seen from the contribution of Household Consumption of the expenses GDP reaching 57.66%. In line with the GDP by the business sectors, the manufacturing industry contributes as much as 19.88% (Table 1).

R. Sunoko School of Business, IPB University, Bogor, Indonesia Ministry of Marine Affairs and Fisheries, Jakarta, Indonesia A. Saefuddin IPB University, Bogor, Indonesia Al-Azhar University of Indonesia, Jakarta, Indonesia M. Nanere · V. Ratten (*) La Trobe Business School, La Trobe University, Melbourne, VIC, Australia e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 V. Ratten (ed.), Entrepreneurial Innovation, Studies on Entrepreneurship, Structural Change and Industrial Dynamics, https://doi.org/10.1007/978-981-16-4795-6_13

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Table 1  Indonesian economy 2011−2020 Description Population Population growth Gross domestic product (PDB) applicable price Economic growth Inflation (y-on-y) Export Import

Unit Juta/million % Trillion rupiah % % billionUS$ billionUS$

2011 242.0 1 .4 7,831.7

2015 255.5 1.31 11,526.3

2019 268.1 1.15 15,832.5

2020 270.22 1252 15,434.2

6 .2 3.81 203.5 177.4

4 .9 3.41 150.4 142.7

5 2.71 167.7 171.3

−2.1 1.91 163.3 141.6

Source: BPS (2021a)

2 Definition of MSMEs Small and medium enterprises (SMEs) are an important engine of employment/job growth (Birch, 1981; Haltiwanger et.al, 2010) also an income source including for people with disadvantages background such as low-skill worker and poor women (Banerjee & Duflo, 2005; Berry & Mazumdar, 1991; Berry et al., 2001; Sjöholm & Lundin, 2010; Tambunan, 2009; Falentina & Resosudarmo, 2019). This reflects the strength of the Indonesian economy which is driven by micro, small and medium enterprises/MSMEs (ADB, 2008; OECD, 2018; Capri, 2019). As Picot and Dupuy (1996) mentioned that governments have pursued to aid and encourage SMEs through public policies, the Indonesian government also pay serious attention to SMEs. Evidence of the seriousness of the government to improve the competitiveness of MSMEs is shown by the existence of a ministry that specifically handles MSMEs and cooperatives. The government believes that MSMEs are business activities capable of expanding employment and providing broad economic services to the community. More specifically, MSMEs have a role in the process of equalization and increasing community income. Thus, economic disparities or inequalities can be minimised and controlled. In 2018, the number of MSMEs in Indonesia reached 64.20 million (99.99%). Micro enterprises have the largest contribution with the number of businesses as much as 63.35 million (98.68%). The small and medium enterprises followed, respectively, totaling 783.13 thousands (1.22%) and 60.7 thousands (0.09%). In terms of contribution to employment, MSMEs in Indonesia are able to create jobs for 116.98 million people (Kemenkop, 2021). MSMEs, which are dominated by micro-enterprises, are a serious concern of the government. This seriousness can be seen by the existence of a special law that regulates MSMEs, namely Law Number 9/1995 concerning Small Businesses, Law Number 20/2008 concerning MSMEs. In fact, as a derivative of the ominibus law, namely Law Number 11 of 2020 concerning Job Creation, the government has issued Government Regulation Number 7/2021 concerning Ease, Protection and Empowerment of Cooperatives and Micro, Small and Medium Enterprises. Besides making changes to the definition/grouping of MSMEs, this regulation also provides an easy access to licenses and a number of other conveniences in order to support

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Table 2  MSMEs criteria in Indonesia Criteria Capital (excluding land and premise) Yearly sales

Net assets (excluding land and premise)

Previous (Act 20/2008) Micro Small – –

≤Rp 2 billion

>Rp 1 to ≤15 billion

≤Rp 50 million

>Rp 50 million to ≤500 million

Recent (PP number 7/2021) Mikro Kecil Menengah ≤Rp 1 >Rp 1 to >Rp. 5 to ≤10 million million ≤5 million >Rp. 5 to ≤Rp 2 >Rp 1 to >Rp. 5 to ≤15 billion ≤15 billion billion ≤15 billion >Rp. 500 to – – – ≤10 billion

Medium –

Source: Author’s own

and encourage increased competitiveness of MSMEs. This regulation changes the classification/definition of MSMEs that were previously based on net assets to be based on capital or based on annual sales results (Table 2). Besides the MSME criteria, there are various forms of business legal entities that can be selected by business actors such as sole proprietary, group businesses, cooperatives, CV/Firma and Ltd. Besides that, there are also “Bumdes”, which are business entities owned by the village. The difference from a business legal entity is generally more about separating the owner’s assets from the assets of the business entity. In practice, micro-enterprises in Indonesia are dominated by sole proprietary.

3 MSMEs Contribution to National Development The contribution of MSMEs to national development can at least be seen from the components that contribute to Indonesia’s Gross Domestic Product. In 2020, Indonesia’s GDP was supported by manufacturing (19.88%), agriculture, forestry and fisheries (13.70%), Wholesale and Retail Trade, Car and Motorcycle Repair (12.93%), Construction (10%), mining and quarrying (6.44%). In the manufacturing industry, the food and beverage industry contributed 34.45% of the portion of the manufacturing industry. Meanwhile, the agricultural sector, plantation crops, food crops, and fisheries were able to contribute 26.50%, 22.41% and 20.43% respectively. The wholesale and retail trade sector was dominated by non-car and motorcycle trade with a contribution of 81.97%. The mining sector was dominated by oil, gas and geothermal (33.36%) and coal (28.42%). Meanwhile, in terms of employment, the agricultural, forestry and fisheries sectors contributed significantly to employment by 29.76%, wholesale and retail trade 19.23%, processing industry 13.61%, construction 6.28%, education 4.63%, transportation and warehousing 4.35%. Meanwhile, from the number of business actors, the agriculture, forestry and fisheries sectors dominated with the number of business

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actors reaching 18.51 million (14.41%) and wholesale and retail trade 14.09 million business actors or 10.97% (BPS, 2021a). In terms of expenditure GDP, household consumption occupies the highest position at 57.66% which is divided into Food and Beverages (23.78%), Transportation and Communication (11.64%), Housing and Household Supplies (7.69%), Restaurants and Hotels (5.53%), health and education (4.23%), Clothing, Footwear and Care Services (2.05%) and others (2.75%). Seeing the role and contribution of MSMEs to the Indonesian economy has led the Indonesian government to strive to increase the competitiveness of MSMEs. This is because micro-businesses are businesses that are vulnerable to business movement. Therefore, the Indonesian government has a serious concern in improving the competitiveness of MSMEs so that they can advance from micro to small and from small to medium. Efforts and strategies have been carried out starting from efforts to simplify regulations through the omnibus law approach, to how MSMEs can compete in the era of the industrial revolution 4.0. It is believed that the 4.0 industrial revolution will provide changes to the microeconomic order. These changes can take the form of the use of digitization, automation and the use of intelligence in economic activities. Of course, these new innovations and practices will result in speed and convenience from the consumer side. However, if micro and small businesses stutter and fail to adapt and have competitiveness, it is feared that the number of MSME actors will decline. The industrial revolution 4.0 has worked and is moving fast with various changes in behavior and business patterns. The presence of application-based services include online motorcycle taxi applications, online food and beverage businesses, online delivery services, distance learning, fintech, e-government services and so on. In terms of efficiency, industry 4.0 may have produced a number of efficiencies. However, the development of the 4.0 industrial revolution can also cause the loss of many jobs and the birth of new jobs. It is predicted that around 51.8% of job potentials in Indonesia will be lost and replaced by online-based business activities and buying and selling (RPJMN, 2020). This condition is certainly a problem in itself when faced with the condition of the competitiveness of MSMEs in Indonesia. MSMEs problems in Indonesia are believed to be related to competitiveness. This can be seen in Law No. 20/2008 that the government has high attention in order to build a good business climate. The strategy developed is to improve regulations relating to the aspects of funding, facilities and infrastructure, business information, partnerships, business licensing, business opportunities, trade promotion and institutional support (Table 3).

4 Industrial Revolution Era 4.0 Indonesia’s Gross Domestic Product, which is dominated by household consumption, is interesting to observe. Meanwhile, industry in Indonesia is more based on natural resources. Although the manufacturing industry has occupied the highest position, if we look further, this industry is dominated by resource-based industries such as wood, leather and textile industries. Seeing this condition, of course the

145

Micro Small Medium Enterprises (MSMEs) and Indonesian National Economies… Table 3  Empowerment target several indicators of entrepreneurship, SMEs and cooperatives No. 1. 2. 3. 4. 5. 6.

Indicators National entrepreneurship ratio (%) SMEs contribution to GDP (%) Cooperative contribution to GDP (%) Small micro industry proportion in partnership (%) SMEs proportion which access credit from formal financial institution (%) SMEs credit ratio to banking total credit (%)

Baseline 2019 3.3 57.2 5.1 8.1 24.7

Target 2024 3.9 65 5.5 11 30.8

19.7

22

Source: RPJMN 2020–2024

challenge ahead is how to increase the added value of these natural resource-based products through processing activities. The Indonesian government is considered to be serious about opening and providing access and protection for MSMEs in Indonesia. However, the challenges include whether the seriousness is commensurate with the dynamics of global competition and free trade, and whether government regulations and policies have actually been able to increase or even decrease the competitiveness of MSMEs. For example, the implementation of the ASEAN-­ China Free Trade Agreement on January 1, 2010, has eliminated the import duty of 2508 tariff posts for the manufacturing sector. In addition to the ASEAN-China free trade agreement, Indonesia has also signed a number of trade collaborations with trading partner countries, both in bilateral and regional frameworks such as: ASEAN Free Trade Agreement (AFTA), ASEAN-Korea FTA (AKFTA), ASEAN-India FTA (AIFTA), and ASEAN Australia New Zealand FTA (AANZFTA). This condition is an opportunity, in which MSMEs in Indonesia are able to grow and enter products into the foreign countries. On the other hand, Indonesian MSMEs still face challenges in the form of imported products entering the domestic market. In terms of market access, the Indonesian government also continues to encourage the development of E-commerce. The government is targeting the value of E-commerce transactions to reach Rp. 600 trillion (US $ 41 million) in 2024. Some of the big and fast growing e-commerce (market place) in Indonesia include Shopee, Tokopedia, Bukalapak and Lazada. However, the rapid development of e-commerce may cause new problems in the future. If consumers in Indonesia feel comfortable shopping online, people in villages prefer to shop online because of the free shipping, it could be that online trading will slowly take on a niche market offline. Shops and markets will be deserted by buyers resulting in fewer employees. The social and economic impacts of shifting people’s shopping behavior and methods need more attention from the government. This is because the foundations of the Indonesian economy are supported by micro-enterprises. If the government is unable to control it with good and strict regulations, then this condition may have a serious impact on the economy. Firstly, how can the government control the monopoly? With the flood of household products from China, importers who were originally distributors could cut the distribution chain by becoming retailers. This condition can be done by hiring an admin and creating different shops in the market place. In the end, the market

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will be dominated by a handful of importers who used to be distributors then turned into retailers. This condition causes online shops which are retailers to find it difficult to compete if they are faced with a condition of choosing the same goods at a lower price. Secondly, if online purchase transactions increase drastically, especially purchases for household daily necessities, of course the impact can reduce the turnover of small shops and traders in the market. In the end, they will be abandoned by the buyer. Third, the selling price of e-commerce products. The products sold are generally retail products. If the government does not control the selling price of products marketed in e-commerce, then prices can move according to demand and are uncontrolled. In this condition, monopoly markets and even cartels could be created. For example, at the time of the outbreak of Covid-19 in early March 2020, when products or tools to support health protocols such as masks, hand sanitizers, alcohol and so on were scarce on the market, it was easy to find in e-commerce. However, these products were sold exceeding the fair price or even at the highest retail price. In the case of Covid-19 in 2020, the prices of health-related products such as masks and hand sanitizers soared due to limited stocks and high demand. The development of e-commerce, which is plentiful, does not mean negating the role of the government in buying and selling transactions that occur in e-commerce (marketplace). Thus, when the government or local governments build markets in order to facilitate and bring together sellers and buyers, do they also need to develop an online market? This is also a concern and a research question that needs to be addressed by the government. Because when the online market is only controlled by some E-commerce, a monopoly on the online selling space may take place. The seller may be burdened or “forced” to buy various service facilities offered by e-commerce providers such as special members, advertising fees, etc., all of which benefit the seller, especially intermediary traders/small traders who sell on e-­commerce. Are the membership fees, advertising costs offered by e-commerce parties comparable to the income they receive? The role of government is needed here in order to provide equitable marketing access for MSME actors, especially micro businesses. Even small grocery stores in the villages apart from competing with free shipping online products on marketplace, they also compete head to head with fast growing convenience store network such as Indomart and Alfamart. The agriculture, forestry and fisheries sectors also face challenges that are no less serious. Population growth and industrial development have also accelerated the process of converting land into settlements and factories. The age of farmers/fishermen, who are generally dominated by the age group above 50 years, is also a serious threat. In addition, the ability to increase the added value of natural products is not significant. As an illustration, the results of a survey conducted by Fisheries Extension Assistants for Business Management in 88 districts/cities involving 8146 MSMEs showed that the main problems faced by marine and fisheries MSMEs were capital (66%), markets (13%), business management (11%), technology (5%), business partners (3%) and human resources (2%) (Fig. 1). Although the agriculture, forestry and fisheries sectors provide the largest contribution to employment, these sectors have long been considered to have a fairly high risk nature, such as fluctuations in commodity prices due to seasonal factors and

Micro Small Medium Enterprises (MSMEs) and Indonesian National Economies…

5%

3%

147

2%

11%

13% 66%

Capital

Market

Business management

Technology

Business partner

Human resources

Fig. 1  Issues faced by marine and fishery MSMEs (Sunoko, 2016) Table 4  SMEs credit in Indonesia Credit Position Micro Small Medium Total UMKM

SMEs credit proportion to total credit (trilliun rupiah) 2017 2018 2019 221.41 251.34 277.23 282.78 312.07 332.12 438.20 469.24 488.79 942.39 1032.64 1098.14

Source: BPS (2021b)

high transportation costs. High transportation costs as a result of business locations that are not concentrated in one particular area and the limited reach of public transportation. The competitiveness of MSMEs, which is influenced by limited business capital, has prompted the government to develop various low-cost financing schemes for MSMEs. Various low-cost financing schemes outside of commercial banking credit include People’s Business Credit (KUR), Ultra Micro Credit and the establishment of several Public Service Bodies under ministries that specialize in providing low interest loans such as LPDB under the Ministry of Cooperatives and MSMEs, and LPMUKP under the Ministry of Maritime Affairs and Fisheries. These various credit schemes provide access to capital with loan interest rates below 6%/ year (Table 4).

5 Covid-19 and MSMEs Development Challenges Covid-19 has become a global threat and is changing the pattern of economic transactions. This is learning about future disruptive changes. Stopped public service activities, such as closing airports and ports, have disrupted the flow of goods and services, even they are completely unable to be distributed. Public offices reduce activity due to large-scale restrictions. Work from home is becoming a trend, and

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virtual meetings are believed to be a new habit in the future. As a result of social restrictions imposed by the government, there has been the closure of public spaces, shopping centers and tourist attractions, as well as a reduction in worker density in the industrial sector. This condition, of course, results in reduced production and choked up the supply chain and even decreased public demand due to reduced activity and reduced income. As an illustration, a survey conducted by Bappenas (2020) shows that MSMEs are affected by covid-19. MSMEs experience financial and non-financial problems. Financial problems faced by MSMEs are in the form of fixed types of expenses such as workers’ salaries, insurance/BPJS, fixed expenses, business debt payments, bill payments, bank loans during the contract period cannot be extended, and other expenses. Meanwhile, non-financial problems include difficulties in obtaining raw materials, increased prices of raw materials, difficulties in distributing products/ logistical problems, reduced orders/requests, inability to fulfill orders due to labor shortages, insufficient health protection equipment to name a few. Of course, this condition resulted in a decrease in income that reached 40-80%. The BPS survey (2020) shows that 70.53% of respondents in the low income group (≤1.8 million IDR/month) admit that their income has decreased. The sectors most affected by the Covid-19 pandemic are the wholesale and retail trade sector, car and motorcycle repair sectors, the transportation and warehousing sector as well as the accommodation and food and beverage provision sector. At the same time, it is these sectors that support the largest employment of workers. Taking into account Indonesia’s economic strength and the impact of Covid-19 and the accompanying changes in behavior, there are at least a number of things that the government needs to focus on. First, the agriculture, forestry and fisheries sectors will continue to provide the largest contribution to national GDP.  However, changes in land use, the reduction of young people who are interested in participating in this sector and the entry of foreign business actors through the free trade scheme may change Indonesia’s economy going forward. These sectors will remain the core sectors considering that the products produced are related to basic human needs, namely food. This sector is also able to survive the midst of the Covid-19 pandemic, despite the decline. Second, the high public interest and accustomed to shopping online in e-commerce is both an opportunity and a challenge in itself. The government is expected to be able to regulate online business as well as offline business. If distributors or wholesalers enter the online market as retailers, in the future many retailers may find it difficult to survive. Meanwhile, the retail trade sector is one of the drivers of the national economy. In addition, transactions and sales in e-commerce also need to be monitored by the government to ensure that monopolistic practices do not occur, let alone cartel practices. Online shops are also certain to get fairness in selling, have sufficient advantages compared to membership fees, advertisements, etc. This is important in order to encourage fairness and MSMEs can grow and develop well in e-commerce. Third, disruption of the global value chain as a result of the Covid-19 pandemic is a challenge for Indonesia to achieve independence through the construction of inter-island hubs by taking into account the advantages of each region. Endogenous factors which are the strength of the

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local economy need to be explored and strengthened. Of course, the national value chain concept is Indonesia’s choice in the future to become an independent nation. Therefore, the concept of increasing partnership in which large industries are required to partner with micro and small industries needs to be seriously realized by the government, in order to form a national value chain. There needs to be a special regulation that regulates this partnership obligation.

6 Concluding Remarks Although the development of the 4.0 industrial revolution could produce the birth of the new jobs, it is predicted that around 51.8% of job potentials in Indonesia will be lost and replaced by online-based business activities. This situation is not a simple matter. It requires more consideration since the Indonesia population is dominated by Z and millennial generations. This implies that Indonesian government should seriously anticipate the impact of industry 4.0. The birth of Omnibus law (Law number 11/2020 on Job Creation) is believed to be a smart way of Indonesia government to deal with and increasing investment and job creation. However, how to develop and strengthening the capacity of MSMEs still needs consideration. Firstly, government need to establish a blue print how agricultural, forestry and fisheries could be more developed as cantilever of national economic through providing appropriate technologies as production process and markets need. The establishment of Ministry of Research and Technology/National Research and Innovation Agency perhaps could solve the challenge by farmers and fishermen in order to develop their productivities and capacities. Secondly, retail trade sector needs more attention considering its contribution to national GDP. Government needs to regulate how to do and operate e-commerce platform to ensure more fairly to retailers such as preventing the act of monopoly or cartel by distributors whose sell retail products with grocery prices. It might solve with identified and tax imposition to distributors, establish rules related to transparency and appropriateness of membership fees and other fees such as super merchant fees and advertising fees. Transparency of delivery time also requires attention to ensure that buyers will receive payment from e-commerce platform as soon as possible after goods received by sellers. How the government prevents the circulation of unstandardized products and control goods that are sold beyond a reasonable price due to high demand for goods such as Personal Protective Equipment’s in the beginning of the Covid-19 pandemic, might increase the competitiveness of MSMEs. Thirdly, some programs that have good impacts to MSMEs should be continued and increased such as skill development and knowledge management for MSMEs, easy to access credits and low interest, and also partnership development in order to widely cover the domestic and international market.

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Technology Entrepreneurship: Fintech Lending in Indonesia Roberto Akyuwen, Marthin Nanere, and Vanessa Ratten

Abstract  Advanced development in information technology has accelerated entrepreneurship in financial sector. The study of technology entrepreneurship therefore serves an important function beyond satisfying intellectual curiosity. By utilizing the frontier technology and practicing more adaptive entrepreneurship approach, various start-up companies have been established and gradually considered as disruptors for the traditional players especially banks. This chapter is dedicated to exploring the progress of fintech lending in Indonesia as a part of technology entrepreneurship. Fintech lending industry is dominated by brilliant young talents who are categorized as agile and aggressive entrepreneurs. Their competitive advantages are supported using the most advanced digital technologies, which are continuously evolved to meet a dynamic consumer demand. A rapid growth of fintech lending is substantial to increase people’s access to finance despite its emerging challenges. Keywords  Entrepreneurship · Digital technologies · Disruptors · Financial sector · Fintech lending · Information technology · Millennials · Technology entrepreneurship

R. Akyuwen Pancasakti University of Tegal, Tegal, Indonesia M. Nanere · V. Ratten (*) La Trobe Business School, La Trobe University, Melbourne, VIC, Australia e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 V. Ratten (ed.), Entrepreneurial Innovation, Studies on Entrepreneurship, Structural Change and Industrial Dynamics, https://doi.org/10.1007/978-981-16-4795-6_14

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1 Introduction According to UNCTAD (2021), human development in recent decades has been accompanied by rapid changes in technology and an increasing proliferation of digitized devices and services. And the pace of change seems likely to accelerate as a result of “frontier technologies” such as artificial intelligence (AI), robotics, biotechnology, and nanotechnology. These technologies have already brought enormous benefits – dramatically highlighted in 2020 by the accelerated development of coronavirus vaccines. But rapid advances can have serious downsides if they outpace the ability of societies to adapt. There are fears, for example, that jobs are disappearing as more economic activity is automated, and that social media is exacerbating divisions, anxiety and doubt. Overall, there are concerns that frontier technologies will further widen inequalities, or create new ones. Most of these issues have been voiced in developed countries. But the implications could be even more serious for developing and under developed countries – if poor communities and countries are either overwhelmed or simply left behind. This article considers how developing countries can catch the wave of frontier technologies, balancing innovation with equity in pursuit of the Sustainable Development Goals (SDGs). Concerns about the impact of frontier technology on inequalities are contiguously develop with the concept of technology entrepreneurship. It lies at the heart of many important debates, including those around launching and growing firms, regional economic development, selecting the appropriate stakeholders to take ideas to markets, and educating managers, engineers, and scientists. Technology entrepreneurship is a vehicle that facilitates prosperity in individuals, firms, regions, and nations (Bailetti, 2012). The forces of innovation, technology and entrepreneurship produce synergies of business transformation. Innovation along with technology helps a business to adapt as well as to evolve and this is important for the survival and growth of a business. Innovation is many a time driven by technology and helps business develop a new opportunity for itself and monetize this opportunity for its gains. Innovation and technology enable businesses to improve how their old products are used, find new uses and even develop new products and services. Entrepreneurship also helps in creating synergies of business transformation through their change management strategy. This strategy of entrepreneurs helps in aligning people, process and technology within an organization and thus helps in creating synergies of technology. Secondly initiatives are taken that are in synchronization with the goals, objectives and visions of the organization. Entrepreneurs have high risk-taking ability and this often leads to creation of disruptive processes, services and products. All these eventually lead to business transformation. The positive impacts of successful business transformation are huge. For example, Finkle (2018) has noted that the growth of the internet has exploded with sales estimated to be over $4 trillion by 2021. The significant growth of mobile technology, social apps, and the cloud has created opportunities for potential online

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entrepreneurs to enter to world of technology entrepreneurship at a low cost. The Internet is booming. Business has exploded from $1.9 trillion in 2016 to an estimated $4.48 trillion by 2021. As technology has increased in sophistication, it has been increasingly easier to enter the online world of business. Three major shifts are occurring on the internet landscape which are social, mobile, and the cloud. Those three instruments are the main supporters of the financial technology or simply mentioned as “fintech”. Fintech becomes the most popular terminology in the global financial ecosystem. It describes a utilization of information technology capabilities by various financial institutions. Fintech has evolved rapidly in the last decade following the continued innovations in the information technology and increased demand of financial institutions to provide adaptive services required by lifestyle changes of their clients. Consumers today are expecting more convenient, less expensive, faster, and secure financial transactions. They are also wanting to have an ability to undertake day-to-day payments and other type of financial transactions at anytime and anywhere. These phenomena have shifted business processes of the most financial institutions in developed and developing countries. In Indonesia context, firms operating in Indonesia’s fintech industry face challenges because of the emerging nature of the market and its fragmentation. Strategies based on differentiation, collaboration and internal resources can help companies exploit the significant market opportunities in a highly-regulated industry where compliance is essential.

2 Technology Entrepreneurship The first symposium on technology entrepreneurship was held at Purdue University in October 1970. This was the first time researchers gathered together to exchange findings and observations on this topic. Then, over the last four decades, technology entrepreneurship has become an increasingly important global phenomenon. It is perceived as necessary for growth, differentiation, and competitive advantage at the firm, regional, and national levels. Technology entrepreneurship appeals mainly to leaders and top management teams of small and large firms who use technology to create, deliver, and capture value for their stakeholders. Technology entrepreneurship also appeals to personnel of regional economic development agencies that attract investments in productive technologies and talent to a particular geography. Over the last two decades, the phenomenon of technology entrepreneurship has attracted the interest of researchers and policy makers due to its significant impact upon economic progress (Mosey et al., 2017). The primary function of technology entrepreneurship is to assemble a combination of specialized individuals and heterogeneous assets in order to create and capture value for the firm through collaborative exploration and experimentation. The combination, some of the assets, or the assets’ attributes may be unique and novel. The initial combination may change over time.

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The definitions found in the literature suggest that technology entrepreneurship is about (Bailetti, 2012): (i) operating small businesses owned by engineers or scientists; (ii) finding problems or applications for a particular technology; (iii) launching new ventures, introducing new applications, or exploiting opportunities that rely on scientific and technical knowledge; and (iv) working with others to produce technology change. The field of technology entrepreneurship is in its infancy when compared to other fields such as economics, entrepreneurship, and management. However, Bailetti (2012) have proposed a clearer working definition of technology entrepreneurship. Technology entrepreneurship is an investment in a project that assembles and deploys specialized individuals and heterogeneous assets that are intricately related to advances in scientific and technological knowledge for the purpose of creating and capturing value for a firm. The proposed definition of technology entrepreneurship is based on four elements: ultimate outcomes, target of the ultimate outcomes, mechanism used to deliver the ultimate outcomes, and interdependence of this mechanism with scientific and technological advances. Technology entrepreneurship is an established concept in academia. However, recent developments in the context of digital entrepreneurship call for revision and advancement. The multiple possible combinations of technology and entrepreneurship have resulted in a diversity of phenomena with significantly different characteristics and socio-economic impact. Ferran and Brem (2017) have indicated that the absence of a detailed characterization of technology entrepreneurship makes it difficult to determine whether we are still inside the original concept boundaries. A recent literature review opts for a broad conceptualization of technology entrepreneurship, suggesting that it is a combination of entrepreneurship and technology-based innovation. Similarly, other researcher wrote a special issue on technology entrepreneurship that it is a type of entrepreneurship that aims to exploit opportunities related to advances in science and engineering. Both conceptualizations are broad and are rather consistent with Bailetti’s (2012) approach. An unexpected challenge to this conceptualization has evolved through the meaning of “technology”. Although most of technology entrepreneurship research started by studying new entrants in high-tech industries, much attention has been given to the technology commercialization efforts of new firms. As a result, the phenomenon under study was usually characterized as a technology-push situation, where the entrepreneur had the mission to find an application and create a market for a new and complex technology. But how much does this perspective fit with entrepreneurial activity using digital technologies? The digitization not only changes its properties but also impacts the overall technology entrepreneurship process. Apparently, this has also major impacts on entrepreneurial processes in general. The digital transformation of most of the input technologies that entrepreneurs use to propose their new innovative ventures has extended the types of technology entrepreneurs. Instead of proposing a clear-cut conceptualization between digital and technology entrepreneurship, it is better to describe the change in meaning of

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technology as a continuum between the extremes represented by the commercialization of the latest scientific breakthroughs and the latest application for smartphones. The concept of digital technology entrepreneurship necessarily combines elements of technology and digital entrepreneurship. Thus, Bailetti’s (2012) definition of technology entrepreneurship needs to be enriched by including specific aspects related to this specific form of entrepreneurship: digital technology entrepreneurship is focused on the identification and exploitation of opportunities based on scientific or technological knowledge through the creation of digital artefacts. Digital technology entrepreneurs build firms based on technologies on the one hand, and on services on the other hand. The introduction of digital elements in the technology entrepreneurship process also reveals a bright side for entrepreneurs. They can quickly scale up their products and aim for a global audience. Furthermore, the digitization of the production processes makes it possible to be both a lean and global company at the same time, blurring the traditional boundaries of technology entrepreneurship. Activities in the entrepreneurship process, such as resource acquisition, are also changing; digital technologies offer the possibility to bring forth early working prototypes that can be used in reward crowdfunding campaigns, completely changing the technology innovation management process in the new firm. With so many possible futures, the ability to design and innovate the business model makes a difference. The unprecedented digital revolution has transformed the meaning and forms of entrepreneurship across the globe. The emerging field of technology entrepreneurship research has not been able to keep pace with the fast changes in the digitization of our society and economy. In recent years, the phenomenon of technology entrepreneurship has attracted the interest of researchers and policy makers that recognized its positive effect on economic development (Mosey et  al., 2017). Drawing from a rich tradition of research, several authors define technology entrepreneurship as the interface of two well-established, but related fields—entrepreneurship and technological innovation. Technology entrepreneurship is a multi-dimensional concept that involves a variety of actors and different levels of analysis. Building from studies in technological innovation, technological opportunities can be recognized and exploited by individuals through new venture creation but equally could be pursued by individuals or groups within existing public or private organizations. According to Schumpeter, the most important function of entrepreneurs is to reform or to reinvent the pattern of value generation by exploiting inventions. The new economic context characterized by globalization, knowledge, increasing role of innovation in national innovation systems and the importance of technological entrepreneurship as a factor in the wealth creation generate the emergence of new types of entrepreneurial ecosystems. The reason why some businesses are more advanced than others lies in successful use of new technologies and technological entrepreneurship fostering. There are several words and definitions used in scientific articles for technological entrepreneurship as technology entrepreneurship, technical entrepreneurship, techno-entrepreneurship and technology

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entrepreneurial ecosystems. However, most of authors have defined technological entrepreneurship as a style of business leadership that involves identification and human resource high-potential capitalization, technology intensive commercial opportunities, managing accelerated growth and significant risk taking. Technological entrepreneurship is basically the processes of assembling resources, technical systems and strategies by an entrepreneurial venture to pursue opportunities. Technology entrepreneurial ecosystems or technological entrepreneurship can be analyzed at many levels and from interdisciplinary perspective view. Nevertheless, the most important component of technology entrepreneurial ecosystem is the entrepreneur itself, and it is the key catalyst in the process of business sectors emergence and start-ups growth. Technology entrepreneurs have more technical skills and competences than non-technical ones, for example business skills. One important step in the new venture success is the transformation of the entrepreneurial mind into managerial one. Technology entrepreneurs have to understand how their businesses will evolve and the importance of managerial skills, and most important strategic oriented mindset. The most important three motivational factors of the technological entrepreneurs are independence, opportunities exploitation and value generation. Currently techno-entrepreneurship promises both high profits and high risks for founders and investors. For entrepreneurs, one of the biggest challenges is to validate and demonstrate the value of opportunity and business idea before its realization. One of the main goals of the entrepreneurial approach is to create and capturing economic value either by developing new technologies or by exploiting them. To achieve these goals, entrepreneurs must develop strategies and business models to recreate new dimensions of socio-economic life beginning from ideas and strategic vision. The ability to recognize business opportunities is a major skill an entrepreneur should acquire and it will dramatically shape the future of his venture. Technology based entrepreneurship brings in more novelty, innovations and R&D products on the markets. If technology is involved, entrepreneurship consists in bringing important changes into the traditional markets and new ones compared to the more traditional entrepreneurship. For an entrepreneur in the field of technology, opportunity recognition starts with the sensing of a need or a change and ends with innovative solutions in which future potential economic value is validated and recognized. The new venture will generate value if the founder understands the entrepreneurial ecosystem. Information and knowledge should have been gathered in order to answer key issues regarding business model, new venture and markets. Techno-­ entrepreneurs will have to undergo a series of other activities, non-technical ones related to management, including creative thinking, incubating, demonstrating, validating, promoting and sustaining. Entrepreneurs will extend their resources and knowledge about technology, markets, managerial skills and competences through their professional, and all these are limited by their absorptive capacity and ability to understand the components of entrepreneurial ecosystem and relations between them. Techno-entrepreneurs will draft and redraft their vision and strategy linking the opportunities with business contexts and startup capabilities. Proactive

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entrepreneurs will understand the business environment and will innovate the business model to remain or to become competitive. Additional challenge that entrepreneurs alleged as being important before integration of the business idea into a new startup was the dearth of networking contacts and experts. Lack of early identification hindered relations with partners and customers, and business idea validation was difficult. Cohesion components of entrepreneurial ecosystem could generate these links. All entrepreneurs felt the lack of experience and knowledge of entrepreneurship and business before starting a business. They have no skills in entrepreneurship and business, don’t know the steps to set up a start-up, and all these have significantly reduced chances to convince the investors. Therefore, business knowledge is important, not only to start and grow a business, but to make it more competitive and attract the necessary financial resources to ensure the growth stages. Many researchers were interested to identify the main challenges, namely the opportunities and threats perceived by entrepreneurs at the first stage – incorporation of business. Due to the risks generated by business uncertainties, entrepreneurs need to take more calculated decisions. The majority of entrepreneurs today have turned entrepreneurial thinking in managerial thinking to more strategically focused on opportunities and increasing business competitiveness. This kind of transformation was more visible at business development phases. Business development has led to the increasing complexity of situations that entrepreneurs faced and their responsibilities have increased over time. Entrepreneurs became aware and should act more responsible. Also they have to develop better skills when they have to take major risks decisions. At the growth and maturity phases, entrepreneurs were willing to risk in a lesser extent. It is known that entrepreneurs have a greater propensity for risky decisions. Business development transforms entrepreneurial thinking because business complexity increases in time. Another challenge is that startups are adapting to the requirements of multinational companies. Although multinationals prefer the stability of contractual relations, entrepreneurs have found that the flexibility and agility of their startup are important conditions for the business to remain competitive. Most entrepreneurs believe that strategic flexibility is particularly important in relations with major customers due to stiffness and organizational procedures that characterize companies with a high degree of organizational hierarchy vertical. Therefore, a start-up or an entrepreneur should adopt proactive strategies to understand the behavior of customers and to be flexible in adapting the strategy and in accordance with the client’s procedures and processes. Cash flow is one of the problems most frequently reported by entrepreneurs. Regardless of the stage of development of their business, entrepreneurs considered that financial strategy is particularly important to ensure the next development stages. Regarding entrepreneurial ecosystem capacity to provide necessary skills, entrepreneur’s opinions are divided. The skills needed for the optimal functioning of a startup in information technology are manifold, requiring engineers in information technology, and high technical and business skills. Entrepreneurs said that in the field of information technology they can find specialized human resources

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because of educational component of the entrepreneurial ecosystem, but at the national level they consider that is a lack of skills in social and economic sciences. It is difficult to find qualified human resources in areas such as project management and marketing of information technology products. It appeared that all entrepreneurs, when starting the business were extremely dynamic trying to respond as quickly and efficiently as possible to the business opportunities. They responded to the needs of products with prototype products because they have extremely short time to go to market. This opportunistic behavior such as learning by doing was a good strategy, especially if the entrepreneurs develop a strategy to enter on the new market with new products, and leaving the product improvement for the later stages. Strategic proactivity and adaptability to customer requirements conduct to further competitive advantages of startups that have secured the first stages of growth. The attitude of entrepreneurs who have a higher tolerance for risk and uncertainty reflects their behavior. More specifically, even if it is risky, it is more appropriate for them to validate a business idea, a product or service directly to the market. The world is hungry for a new kind of leadership (Accenture, 2021). Amid the challenges of 2020, two truths became evident. More companies than ever have embraced the axiom that every business is a technology business, and they’ve ignited a new era of exponential transformation as technology continuously reshapes industries and the human experience. Now, as we begin shaping our post-pandemic reality, companies must learn to master change. Adaptability, innovation, connectedness—pick a metric and businesses asserted they were leaders in the space, ready for anything. But 2020 and the COVID-19 health and economic crisis cleared their rose-colored glasses, bringing a new reality into sharp focus: Inflexible work arrangements and operations. Fragile supply chains. Untrustworthy information. New customer needs. The pandemic and the resulting disruptions exposed the limitations of long-standing norms for how companies operate and how people live. Forced to recognize this deepening digital achievement gap, companies began to compress their decade-long transformation agendas into two to three-year plans. Leaders pivoted to focus on building a digital core that would allow them to simultaneously transform multiple parts of their enterprises and talent. In essence, they began looking at technology as a saving grace in an unpredictable time, allowing them to accelerate their efforts to minimize the disruptions of the pandemic. Amid this chaos, enterprises not only pivoted faster than they believed they could, they started demonstrating the adaptability, innovation, and connectedness that they thought they’d already achieved. A recent study revealed that digital leaders (the top 10% of companies leading technology innovation) achieve 2–3x revenue growth as compared to their competitors—a widening divide that Accenture (2021) calls the “Digital Achievement Gap.” This journey of reinvention, however, has only just begun. The pandemic radically accelerated changes that companies knew were coming but didn’t expect to see so soon. Major shifts that were predicted to materialize in years are happening here and now: industry convergence, localized supply chains, mass virtualization, and rapidly and continuously changing customer expectations. But, while

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immediate changes are clear, there’s less clarity than ever into what our long-term future holds. We’re left with a global set of circumstances we’ve never seen before. On one hand, we have widespread and accelerated digital transformation coupled with the digital building blocks to create almost anything. On the other, we have blank slates in every industry waiting for the next vision of the future to be defined. Combined, it’s an opportunity we may never see again in this generation: to actively shape our future almost from the ground up. But this is a challenge that demands a new kind of leadership. Leading in the uncertain future will require companies to become Masters of Change (Accenture, 2021). The single biggest reinvention of industry in living memory has been ignited. People and the world need leaders who will look beyond today’s triage effort and start building what comes next. While it will be tempting for companies to retreat to what they know, 2020 brought the need for a different path forward into clear focus. If businesses continue to have a clear-eyed perspective and sharp focus on their expedited digital transformations, reimagining everything from their people, to data, architectures, and ecosystems, they can emerge as leaders. During the pandemic, it became starkly clear that there is no leadership without technology leadership. Leaders Don’t Wait for a New Normal, They Build It! As the saying goes: The best way to predict the future is to invent it. Prioritizing technology is essential to ensuring the enterprise doesn’t fall behind. However, true leadership will come from companies embracing radically different mindsets and models. The world has been beset by sweeping change and demands leadership that thinks boldly in response (Accenture, 2021). In the digital age, entrepreneurship is now more in demand than ever before (Soltanifar et al., 2021). However, digital entrepreneurship is not limited to holding online meetings, paperless office or communication on social media. Rather, it must be seen as a holistic approach to thinking that encompasses all processes of an organisation, including communication and service provision. If we succeed in “thinking digitally”, such as integrating digital process support at all levels, we can experience long-term success and keep uprising competitors at bay. Data, information and knowledge are the new factors of success that lead to new market opportunities and business models through their intelligent combination and networking with operational performance and service provision. This ranges from platform economics to support systems, as well as the use of new technologies to make processes more effective and elegant. It is precisely the exploration of promising opportunities and the creation of unique ideas that offer digital entrepreneurs the potential to successfully develop their business. The design of business models, the planning of the architecture of software and hardware components, as well as the storage of individual data, information and knowledge components, form the core of the new digital entrepreneurial approach. There has been much discussion of agility, disruptive processes and the constantly increasing speed of market developments. Therefore, according to Soltanifar et  al. (2021), the digital entrepreneurial personality must maintain the following competencies:

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• Creativity, organisational skills and a feel for market opportunities; • Strong knowledge of the technical requirements and the competitive environment; and • Courage to apply the process of creative destruction to their own business or its processes at any time. In doing so, new ideas and their implementation must be kept in view, as well as one’s own service offerings, and the way they are created. In particular, the demands on quality, efficiency and speed of the processes force entrepreneurship when updating and revising internal processes. Digital entrepreneurship is reshaping business and communication with cloud services, augmented and virtual reality, artificial intelligence and blockchains as some of the technologies that comprise our increasingly digitised world. Digital entrepreneurship focuses on leveraging digital technologies or digital business models to explore and exploit entrepreneurial opportunities. A key component of digital entrepreneurship is how digital technologies and the process of digitisation transform how entrepreneurs can create new sources of value and wealth. However, digitalisation is also transforming what it means to be entrepreneurial and the skills and capabilities required. The entire entrepreneurial process can focus on a digital venture as the content of an entrepreneurial journey. Some of the authors have investigated the impact of technologies, such as artificial intelligence, distributed ledger technologies or the industrial Internet of things, on new or established business models. Others discussed the influence of digital technologies on the entrepreneurial process of generating an idea or leveraging digital options to finance the entrepreneurial journey. Throughout the entrepreneurial process, a deep understanding of digital creativity can help an entrepreneur create the right ideas at the right time. Digital entrepreneurship holds potential not just for the wealth of entrepreneurs and organisations but society as well through its close connection to sustainable development goals. In this regard, Adam and Alarifi (2021) have studied the role of external supports on innovation practices for survival of small and medium enterprises (SMEs) in the COVID-19 times. According to them, innovation has become a necessity for all contemporary enterprises that want to survive in a world characterized by competition, technological change, and recurring crises. The concept of innovation refers to the use of new technology or new management practices in an organization to achieve a targeted improvement in its operations. From a SME perspective, innovation commonly indicates new products or processes that address customer needs more competitively and profitably than existing ones. The term “innovative practices” refer to the effective implementation of new solutions to challenges faced by SMEs, which include effective implementation of new ideas in relation to the organization’s product, services, or processes; new marketing mechanisms; or new administrative practices for work amelioration and upgraded performance. The key driver of innovation practices in enterprises is the ambition to get reimbursement in the form of better performance. Therefore, innovation is defined as creation of some modifications in the enterprise’s practices that are intended to

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obtain an improvement in performance. Adam and Alarifi (2021) have confirmed that innovative practices that were used by SMEs during COVID-19 significantly affect their likelihood of future survival. The SME survival indicators were positively affected by innovative practices in the fields of external knowledge, structures, leadership, and renewal of employee activities. Meanwhile, UNCTAD (2021) has used the term of frontier technology to represent the most advanced information technology. There is no single definition of frontier technologies, but they are generally understood to be new and rapidly developing technologies that take advantage of digitalization and connectivity. These technologies can have dramatic impacts on economies and societies as well as on the development of other technologies. They are including artificial intelligence (AI), the Internet of things (IoT), big data, blockchain, 5G, 3D printing, robotics, drones, gene editing, nanotechnology and solar photovoltaic (Solar PV). Most of these technologies have emerged in a period of dramatic falls in the prices of data storage and solar energy. Frontier technologies can increase productivity and improve livelihoods. AI, for example, combined with robotics can transform production and business. 3D printing allows faster and cheaper low-volume production and rapid iterative prototyping of new products. Using these and other innovations, enterprises in developing countries can leapfrog previous paradigms and move ahead rapidly. Despite low resources and capabilities, many firms and farms are already doing so. In several countries, IoT is being used to generate advice on farming techniques and 3D printers are being used to create fashion items such as caps, bracelets, and dresses. Although, there are abundant technology entrepreneurs, however, improving financial inclusion among global population is still a substantial challenge. Globally, approximately 1.7 billion adults remain unbanked, a little over one-thirds of which are located in China (225 million), India (190 million), Pakistan (100 million), and Indonesia (95 million) according to the Findex report from the World Bank. Given the geographical challenge and the unavailability of credit history of the unbanked, banks have found it difficult to reach this segment in a profitable manner (KPMG, 2018). Indonesia is Southeast Asia’s largest economy with a population of more than 260 million people. With a large youth population, burgeoning mobile phone and Internet penetration, Indonesia presents a unique reserve of untapped fintech opportunities. However, nearly 40% of Indonesia’s large and youthful population remains unbanked. Geographical challenges and the unavailability of credit history have made it challenging for banks to reach this unbanked segment profitably. Within the unbanked segment, AFTECH reports that there are close to 49 million underbanked SMEs, further extending Indonesia’s financial inclusion challenge to individuals and small businesses that are struggling to get loans at reasonable rates from commercial banks. It is estimated that limited credit access to such SMEs reduces Indonesia’s GDP by nearly $130 billion, approximately 14% of the total. The expedited development of fintech in the last 2 years has increased Indonesia’s GDP by IDR 25.97 trillion. Though the attention in fintech has historically been on payments, investments have moved towards lending, raising US$21  million in

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investments by the end of the last quarter of 2017.7 There has also been a stark increase in the number of borrowers, having increased 38-fold. High mobile and internet penetration and a burgeoning demand from both borrowers and lenders has paved the road to a boom of Peer to Peer (P2P) lending platforms in Indonesia.

3 What Is Fintech Lending? In recent years, internet-enabled peer-to-peer (P2P) lending has emerged as an alternative to bank lending (Nemoto et  al., 2019). P2P lending platforms provide an online marketplace that matches investors willing to lend with borrowers seeking loans, removing the need for banks to act as intermediaries. Borrowers may be individuals or businesses, depending on the platform. Likewise, lenders may be individuals or collectives. In light of the much-discussed failure of banks to provide adequate loans to small and medium-sized enterprises (SMEs), this development offers a significant opportunity. Many literatures have revealed that traditional banks are often reluctant to lend to smaller companies because of higher default rates, a lack of data, and a smaller scale making lending to them less profitable. As a result, many SMEs are unable to obtain funding. With SMEs estimated to represent more than half of gross domestic product and employment in most countries, the economic benefits of improving their access to finance could be substantial. The benefits to SMEs may go beyond mere access to this mode of alternative funding—competition from P2P platforms may also prompt banks to recapture market share by extending more loans to SMEs and improving the services offered to them. There have been many different attempts to construct appropriate regulation around this new phenomenon, and these sometimes have unintended consequences. Finding appropriate modes of regulation for this emerging industry remains experimental and contested. P2P lending platforms attempt to solve the problems of lending to SMEs by utilizing automated processes to reduce costs and credit risk models that use nontraditional data. P2P lending and other forms of fintech financing have grown rapidly over the last few years but have developed at very different rates in different countries. P2P lending carries inherent risks. Investors risk losing invested funds, and SMEs that rely on P2P services for funding face the possibility of capital drying up or becoming more expensive if the investor pool shrinks. The P2P business model also involves some stability concerns. Since P2P platforms receive revenue in proportion to the loan volume originated, they face financial incentives to maximize loan origination, even at the expense of credit standards. They also rate borrowers’ credit themselves, despite not being exposed to the direct financial consequences of defaults. Another weakness of these platforms is their source of funding, which relies on investors retaining confidence in the platform to maintain lending levels. Because investors cannot rely on deposit insurance as they can with their bank deposits in many countries, P2P platforms that allow early withdrawal of funds are vulnerable to mass withdrawals if investors lose

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confidence. It remains unclear whether investors will be protected in the event of a platform’s failure—a poorly managed, high-profile failure would not only cause losses to investors but also erode the trust needed for investors to keep on lending. Lending is also likely to be pro-cyclical, with unprofitable businesses sustained by cheap loans in some periods and priced out by very high interest rates when credit becomes expensive. Agarwal and Zhang (2020) have explained the 2008 global financial crisis a trigger for the fusion of new technology in the design and delivery of financial services. The movement of fintech has been introducing game-changing technological innovations that transformed the way the financial industry operates and fulfilled the customer’s needs with the help of automation. New products and infrastructure upgrades are tested and introduced at a much faster pace that what we observed in the other “Industrial Revolutions”. The fintech disruption also imposes big threats and more pressures on traditional banks. Examples of activities in fintech range from digital payment instrument, fintech lending (i.e. peer-to-peer lending and crowdfunding), open banking, cryptocurrency to robo-advising. The adoption of fintech services also moved in a steady and upward pace in many countries. The definition of fintech broadly adopted by the regulation and professional bodies, including the Financial Stability Board (FSB) and the Basel Committee on Banking Supervision(BCBS), is stated as “…technologically enabled financial innovation that could result in new business models, applications, process, or products with an associated material effect on financial markets and institutions, and the provision of financial services…”. The explosion of fintech in the last few years may offer an alternative solution and has transformed the sector dramatically. The distinct feature of challenger banks from traditional banking model is heavy reliance on modern financial technology practices, such as online-only operations, that can help avoid the costs and complexities of traditional banking. The biggest disruption to banking industry as a result of the fintech lies on the retail banking sector. The new financial intermediaries, known as shadow banking system, provide maturity transformation service and facilitate the creation of credit just like traditional banks and credit unions. But they do not accept traditional deposits and therefore fall outside the realm of regulatory oversight. For example, they do not face the normal regulatory oversight and rules regarding capital reserves and liquidity. As a result, many of the institutions and instruments have been able to expand rapidly and pursue higher market, credit, and liquidity risks in their lending after the financial crisis. At the forefront of this development are fintech lenders that shift away from “bricks and mortar” to online mode by automating each step of the origination process. P2P lending, also referred to as “marketplace lending” or “crowdfunding”, has emerged and rapidly gaining market share in consumer and small business lending during the financial crisis of 2008. The innovation of P2P lending model is that both lenders and borrowers are directly matched through online platform, without an intermediating bank, to originate the loaning of money to individuals and businesses. Following several years of exponential growth, the P2P sector has become a significant segment of credit supply to consumers. In terms of geographical

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landscape, the global peer to peer lending market is segregated into various regions such as Europe, Asia-Pacific, North America, South America, and Middle East and Africa. Online lending, or P2P lending, is a practice of funding unrelated individuals (‘partners’) without going through commercial banks. P2P lending is carried out online through various loan platforms and self-developed credit checking tools for P2P lending companies (Wang et al., 2015 in Suryono et al., 2021). P2P lending is a new business model that brings together borrowers and lenders on a single platform. It is operated digitally through a platform with demand requests which the investment committee evaluates before the investment is made. As a two-sided e-commerce phenomenon, P2P lending has received attention in risk control including the ability to accurately assess and screen borrowers in controlling credit risk. Various methods are used to determine credit risks, such as using data mining, extraction of textual features from the borrower’s description, and Big Data based on neutral networks. Other studies have been conducted to avoid prediction errors in the P2P lending business. In addition to focusing on credit risk control, there are several business processes in P2P lending, such as the borrower registration process, the credit risk assessment process, the disbursement process, the collection process, the refund or payment process, and the investment process by lenders. Interestingly, current research focuses not only on credit risk assessment but also on how investors, in this case, lenders, evaluate borrowers by including demographic characteristics. Recently, there has been research investigation on how political and financial forces play an essential role in determining the failure of P2P lending platforms. Platform failure occurs because it ends up going bankrupt or the platform owner runs off with investors’ money. P2P markets first emerged in developed countries with more efficient financial sectors, mature credit core systems, and more effective law enforcement than emerging markets. In Indonesia, the solution to meet people’s needs for financial services is to use P2P lending services. The presence of fintech lending is a result of decreased public trust in the formal financial system. Credit for the banking industry can only be undisturbed if banks are too selective in channeling credit (only to reduce Non-Performing Loans). The global financial crisis followed by an authorization response that tightened the regulatory regime for financial institutions resulted in gaps in financing. Fintech-type P2P lending is a practice of lending and borrowing funds without a bank institution as an intermediary. P2P lending is an online loan platform that links lenders and individual borrowers and offers microcredit. This innovation is a solution that helps micro, small and medium enterprises gain access to capital. According to the Indonesia Financial Services Authority (OJK) regulatory documents, an Online Loan Platform is a financial service provider connected to an internet network where the platform brings together lenders and loan recipients through an electronic system. So, P2P lending is a technology that combines the internet and financial services for lending and borrowing.

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According to Deloitte (2020), five opportunities are identified in the fintech industry that give an overview of what is happening now with COVID-19, and what is the promise ahead. They are: 1. continued acceleration of partnerships; 2. advancing financial inclusion programs; 3. accelerating economic relief efforts; 4. empowering gig workers; and 5. harnessing the Internet of Things. Najaf et al. (2021) have examined the impact of the COVID-19 pandemic on the determinants of fintech P2P lending. The issue is significant because P2P lending platforms have attracted borrowers with little to no access to the credit facilities offered by conventional banks during the pandemic. Although many banks and financial institutions have offered online loan application services during the COVID-19 pandemic, few have developed verification of loan applications submitted online. The COVID-19 has brought a drastic change in the key determinants of P2P lending. Fintech P2P lending has become the most viable alternative credit option available to borrowers. In addition, Cornelli et al. (2021) have concluded that the Covid-19 pandemic represents an important test to these new business models. Information on lending flows and credit losses over 2020 is not yet available. However, the recent “Global COVID-19 Fintech Market Rapid Assessment Study” suggests that digital lending transaction values contracted globally as a result of Covid-19. It will be important to assess how new credit models function during the Covid-19 induced recession. After the initial shock and credit losses, it can be expected that the greater demand for online services may actually further support fintech and big tech credit. For instance, big techs have seen a surge in demand for e-commerce services, particularly in countries with more stringent lockdown measures. Both fintech and big tech providers have seen a surge in demand for digital payment services, which generate further transaction data for use in lending decisions. In some markets, fintech and big tech firms have even helped to channel emergency lending to small businesses during the Covid-19 pandemic. Policymakers should continue to monitor these new markets, and to develop a better understanding of their risks and potential. They may need to accelerate the pace of regulatory intervention to better regulate and supervise an increasingly digitalized financial sector. Some authorities have already taken measures to better regulate fintech credit platforms, for instance with dedicated rules or frameworks. There is an ongoing debate on how best to regulate big tech firms, both in financial services and beyond, as evidenced by recent regulatory initiatives in China, the EU and the US. Ensuring financial stability and market integrity, efficiency and competition, and consumer and data protection will pose new trade-offs and challenges. Equally, during the Covid-19 pandemic, fintech firms have reported a need for regulatory interventions that relate to core regulatory activities, such as customer on-boarding and stream-lined authorization processes. Despite calls from the industry for greater regulatory assistance, fintech firms have by and large been unable to

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enjoy enhanced support from their key regulator or supervisory relationship. There is no question that fintech lenders are increasingly active in small business finance, but financial regulators need to know whether that activity is expanding access to credit for small businesses (Barkley & Schweitzer, 2021). On the effectiveness of online credit, growth expectations from online lenders are better than those for bank borrowers. This is despite controlling for compositional differences that are strongly predictive of which firms receive credit from banks and from fintech firms, including profitability, revenue growth, and self-­ reported credit scores of the business or owner. This result is supportive of the position that financial innovation has been beneficial to borrowers, particularly when combined with the greater financial inclusion shown by fintech lenders. While the effects on expectations for growth are relatively small, the ordering of customer satisfaction across lender types is clear: bank borrowers are more satisfied than online borrowers, who are more satisfied than businesses that were denied credit. This may point to issues that both the lenders and regulators may want to address as online lending continues to expand.

4 The Progress of Fintech Lending in Indonesia Indonesia’s P2P sector is still in its infancy, however the risk of P2Ps becoming a magnet for criminality remains a very real threat for Indonesia (KPMG, 2018). In larger economies where P2P loan volumes have been growing exponentially, P2P platforms are now failing nearly as fast as they grew. The reasons are manifold, ranging from information asymmetry between players and platforms, to capital pool problems and illegal guarantees. However, the most common cause has been the prevalence of operators who did not know how to properly run a P2P platform and lenders who quickly jumped at the opportunity for high returns without proper due diligence. As a counter measure for failing P2P lending platforms, complex registration process and tightened legislation in areas, such as overly high interest rates, misuse of funds and exaggerated return figures, were implemented with the aim to crack down on illegitimate lenders. Having learnt from other economies, Indonesia enforces tighter regulations from early stages via two main entities, Bank Indonesia and Indonesia Financial Services Authority or Otoritas Jasa Keuangan (OJK). Bank Indonesia’s regulatory scope is specific to payments while OJK functions as a supervisory arm to oversee P2P lending. In the interest of greater transparency, OJK has encouraged Indonesian P2P platforms to collaborate with banks. It is further assisted in the POJK No. 77/ POJK.01/2016 that every lender and borrower is required to have bank accounts, with the exception of group lending. A common consensus in the financial sector is that the development of marketplace-­lending – specifically P2P lending – directly competes and diminishes the growth of the banking industry. However, in Indonesia, the fintech industry will be run parallel to that of banking. OJK acknowledges that banks were wary in the

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early P2P lending stages, but with increasing regulations, large banks are significantly more inclined to partner with these platforms. PwC (2019) has stressed that fintech lending players match different risk appetites for lenders with different risk levels of borrowers to fulfil the borrowing needs of the broader segments of Indonesian society. Fintech lending players have leveraged a combination of different business models, technology and innovative approaches, enabling them to achieve wider coverage within remote areas, and solve infrastructure and risk management challenges that are typically faced by banks in serving untapped segments. Within the fintech lending industry, different business models have emerged (e.g., peer-to-peer vs. institutional-to-peer, productive vs consumptive loan providers). Some players even leverage innovative approaches, such as various Online to Offline (“O2O”) channels, to provide an alternative means in driving loan origination and disbursements for non-mobile phone users. There are various methods of loan disbursement and repayment within the fintech lending business model, which creates the formation of multiple access channels for consumers. The typical marketplace model can be broken down into four steps. Firstly, you have lenders (whether individuals or institutional), who have excess capital and are willing to lend these capital for a certain level of return. Then there are borrowers (whether individuals or productive MSMEs), who have submitted their loan request to the P2P lending platform. The P2P lending platform then acts as the marketplace “connector” that matches borrowers’ loan needs to the financing capital provided by lenders. Besides acting as a “connector”, the P2P Platform may also utilise the services of a credit bureau to analyse a potential borrowers’ credit history and assess the risk of the loan. During the loan disbursement phase, individual borrowers can either take a full cash disbursement or receive disbursement in instalments. Enterprises have the option of a cash disbursement or a non-cash disbursement that, for example, could be raw materials needed for their businesses. The fourth step, the repayment and withdrawal channel, has both online (e-commerce or bank transfer) and offline (retail store) options. Through the online-to-offline channel, fintech lending is able to obtain wider coverage. Indonesia has huge market potential in fintech lending, and some are looking at China’s Fintech boom beginning in 2013 as a benchmark. Indonesia has benefitted from analysing China’s initial mistakes, which has shaped the government to take a more supportive regulatory approach. China’s market and business model targets the hundreds of millions of lower-income individuals who do not have credit cards, which resulted in a majority of Chinese P2P players offering short-term consumer loans. Indonesia, for its part, is targeting both underserved individuals and MSMEs, which provides a balanced mix. China’s regulation only started to implement increasingly strict regulations (with stringent compliance procedures) in 2017 to eliminate the increasingly large number of “delinquent” P2P lending platforms, which resulted in a negative effect of a market fall-out. From the start, Indonesia’s regulatory framework has taken a principle-­based and collaborative approach, which aims to control the market and

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minimize the proliferation of “delinquent” platforms early on. Through the establishment of AFPI (association of fintech P2P lending), Indonesia is currently entering the “Third Wave,” where players have a clearer code of conduct, the government has a better view for licensing legal players, and investors also have higher confidence to invest in or acquire a fintech lending companies. This differs from the previous waves where the “First Wave” marked the unregulated era where players were testing out business models; and the “Second Wave”, which marked the involvement of OJK to ensure customer protection by establishing distinction between legal and illegal fintech lending players. Santoso et  al. (2020) have explained that the development of technology has reached all sectors of the economy including financial intermediaries, and this phenomenon is more pronounced in the emerging economies like Indonesia. Several years ago, Indonesian people should go to the bank to obtain financial services such as opening bank account and transferring money, while now all of these activities could be performed directly from their smartphones. In the past, to perform transaction activities in the grocery stores, people had to go to automated teller machine. However, digital fiat currency and e-wallet are widely used nowadays to perform transactions activities even in the traditional market, and this is more pronounced by the massive campaign of Bank Indonesia about promoting cashless society. As the fourth most populous country in the world with total population more than 250 million, Indonesia has a great opportunity to support the development of fintech particularly P2P lending. Based on the data from BPS (Central Statistical Bureau), total internet users in Indonesia have reached 150 million in 2018 and it is predicted to grow 13% yearly. At the same time, more than 50 million MSMS in Indonesia do not have access to the bank. Although fintech P2P lending in Indonesia seems to have a bright prospect, however, its development cloud be considered in its infancy. The formal regulation about fintech P2P lending in Indonesia was issued by OJK in December 2016. The regulation is comprehensive as it covers all aspects of fintech P2P lending. This regulation was launched to provide bright future of fintech P2P lending practices in Indonesia. Fintech is a growing industry in Indonesia, supported by advances in the technological infrastructure (Suryono et  al., 2021). At the end of 2019, the Financial Services Authority (OJK), recorded 164 registered and licensed fintech (P2P lending) companies. However, since early 2018, the Investment Alert Task Force (SWI) and the Ministry of Communication and Information Technology have blocked 1350 illegal fintech platforms. Illegal fintech lending practices have mechanisms beyond the responsibility and authority of the OJK, including the risk of collection and distribution of personal data. Before 2016, Indonesia did not yet have a law regulating fintech activities, so it was feared that it could harm the public due to potential problems. For this reason, in early 2016, OJK has regulated fintech P2P lending in OJK regulation number 77. The OJK has also established a Fintech Lending Supervision Directorate to build a licensing system in this sector. For example, Amartha P2P Lending is one of the platforms that has obtained OJK permission.

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The initial hope for the emergence of the fintech P2P lending platform was to provide funding for SMEs. There are alternative payment schemes in the form of sharia-based loans and profit-sharing plans. The loan process, loan costs, interest, loan amount, and loan flexibility affect SMEs to get loan funds. However, some researches have showed that fintech P2P lending growth in Indonesia does not significantly affect bank credit growth. This happens because the platform enters the competition through a less attractive market to the public. And, it is still in the process of developing product and service quality. Several adoption models emerged and the perceived benefits were an important and significant factor affecting adoption. Adoption is also influenced by feature innovation, application functionality, and creating a user-friendly platform. Variables performance expectancy, social influence, and effort expectancy can influence behavioral intention using a fintech P2P lending platform. Apart from being viewed from the adoption side, the fintech lending model has begun to develop into funding in various aspects of daily life, such as tourism travel and another long and short-term financing. Fintech P2P lending issues in Indonesia are as follows: 1. public awareness about fintech P2P lending; 2. data leakage and restriction of data access, including personal data protection; 3. personal data fraud; 4. illegal fintech lending; and 5. product marketing ethics. Tambunan et  al. (2021) have examined recent development of MSMEs, their main constraints and access to financing, and the growth of online-based P2P lending in Indonesia. The number of MSMEs continues to grow even though they face a number of obstacles with limited access to funding as the most serious. Although commercial banks are required by the government to extend credit to MSMEs, the percentage of total commercial credit to these enterprises is still very small. Therefore, the emergence of fintech P2P lending is important as an alternative source of funding for MSEs. In the digital area, banks are making more non-face-to-face banking transactions. Twenty years ago, the organizations in the business ecosystem were banks and/or lenders, consumers and/or MSMEs, e-commerce merchants, or credit reporting agencies; and the ecosystem was not complex. But today, the ecosystem is changing. There are more organizations involved in the ecosystem and information from social media becomes more important. Lenders such as fintech P2P lending companies can offer loans to their customers without using data from credit bureaus; and every process can be done easily and quickly through mobile devices. The development of fintech has accelerated in recent years in many countries. Unfortunately, according to Tambunan et al. (2021), empirical evidence on the role of fintech P2P lending in funding MSMEs is hard to find. There are at least two reasons why research on the role of fintech P2P lending in funding MSMEs is still rare. First, despite developing rapidly, fintech P2P loans to businesses in percentage is still relatively small compared to non-businesses such as households or individual customers. Second, data on total fintech P2P loans to businesses does not

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differentiate according to the business scale of the borrowers. In the case of Indonesia, there is still limited academic investigation on fintech P2P lending. No doubt that digitalization and fintech can offer many opportunities to address MSMEs’ financial constraint by allowing them to have better access to finance by, for example, using branchless banking technologies such as internet banking, as well as fintech P2P lending or crowd funding, which in turn can enhance their competitiveness. Various authors have emphasized a need to encourage the growth of fintech P2P lending to support MSMEs, especially those which have great market opportunities. With P2P or fintech in general, several constraints to MSMEs access to financing such as lack of credit information and high cost of servicing MSMEs’ financing needs could be reduced. In overall, the literature reviewed shows that the development of fintech has accelerated in recent years in many countries, including Indonesia. Although it has not been proven yet worldwide, as a theoretical proposition, fintech P2P lending companies offer a great opportunity for MSMEs to have better access to funding. This theoretical proposition is based on two assumptions. First, without discounting other factors, MSMEs’ access to fintech P2P loans should be a strong determinant of their growth. Second, the flow of funds from investors to fintech P2P lending companies should be uninterrupted. and MSMEs have access to the internet or wi-fi. SMEs are important to discussed because they are estimated to contribute 55 percent of GDP to countries that are members of economic cooperation and development organizations, while employment opportunities provide 60% worldwide (Najib et al., 2021). Therefore, the economic benefits of increasing SMEs’ access to the financial sector can be very important. The growth of fintech business provides an opportunity for small business owners to access financing and develop their business capacity. One of the fintech services that is currently growing rapidly is P2P lending. Najib et al. (2021) have stated that in 2019, the global fintech P2P lending market size will be $67.93, and by 2027 it is projected to reach $558.91 billion with a compound annual growth rate of 29.7% from 2020 to 2027. In Indonesia, the growth of fintech lending loans is projected at 214% over 2018–2020. Fintech P2P lending platforms can eliminate the need for banks to act as intermediaries, as they provide an online marketplace suitable for investors willing to lend with borrowers looking for loans. Basically, fintech P2P lending is not a new business model, since in traditional ways people were commonly implementing lending and borrowing without an intermediary. However, in the era of the industrial revolution 4.0, fintech P2P lending companies acted as intermediaries to facilitate investor interests with the desire to be borrowed to become feasible with fintech. Fintech P2P lending in the industrial era 4.0 has taken advantage of digital technology, which allows simpler processes to reduce costs, enabling the use of electronic contracts; the diversification of investors to reduce credit risk; and the use of further information in credit scoring so that the credit disbursement process is also faster. Fintech P2P lending as part of financial innovation has a positive impact on the operation and productivity of small business. The most important role is that fintech, again, can improve financial access for small businesses that cannot be covered by banks or other formal financial institutions. Fintech is suitable for small

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businesses because it does not need to provide collateral to access funding. In addition, fintech P2P lending has the advantage of providing loans with lower interest rates and without collateral to borrowers, while lenders get high returns on investment. Although the existence of fintech can be beneficial for small business owners, not all small business owners are willing to use fintech financing. The reasons for this are still controversial, such as insufficient knowledge about fintech, miss perception and feeling insecure or having no confidence to use fintech. In general, the barriers for small business owners to adopt fintech are almost the same as those of other innovation adoptions, namely their resistance to change, so they are reluctant to adopt new technologies including financial innovation such as fintech. In short, although fintech has the potential to improve financial access for small entrepreneurs, there is not much knowledge about the fintech adoption process by small business owners, especially in P2P lending. From their research, Najib et  al. (2021) found that performance expectations, social influence, facilitation conditions, price value, knowledge and security perceptions influenced the adoption of fintech by small food business owners. The variable of price value and social influence is the strongest determinant of fintech adoption by small food business owners in Indonesia. The variables of business expectations, hedonic motivation and habitual behavior do not determine whether small business actors adopt fintech applications. They also found a positive relationship between fintech P2P lending adoption and the sustainability of small food businesses. Business sustainability has been an important issue for small businesses, especially those who are still in the startup stage. Lack of capital is the main problem faced so far, and the solution to this problem is increasing their operational capacity through funding from fintech P2P lending. Pratama (2021) reminded that P2P lending is an activity or system at a fintech company that brings together fund owners (investors/lenders) and borrowers (borrowers). The trick is to create an online platform that provides facilities for fund owners to provide loans directly to creditors with higher returns. However, fund borrowers will also benefit, because they can apply for credit with terms and processes that are easier, faster, and without collateral, when compared to other conventional financial institutions, such as banks. Pratama (2021) then concluded that structural assurance, ease of use and brand image are significant on trust in using fintech in Indonesia. The structural assurance has the biggest impact on trust of using fintech. He suggested customers who believe that they are legally protected against financial, privacy and identity loss when using fintech applications. Currently, there are many fintech P2P lending applications that have OJK licenses. Meanwhile, the ease of using P2P application is also an important factor in the trust of using fintech. When people can quickly understand and easily use the P2P lending application, the higher the trust. With the current advancement of technology, application service providers continue to innovate in providing convenience application services for their users. The growing brand image is also an important factor in public trust when choosing a P2P lending application. The better the

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reputation of application development, the higher the level of use of the P2P lending application. However, the integrity of the P2P lending application still lacks the trust of customers in Indonesia. This is because there are still many P2P lending applications that do not fulfill the agreement that was given at the beginning. Many people are disappointed with P2P lending application services, such as taking all contacts on the customer’s device, invoicing dirty sentences and terrorizing the arrears’ family. Fintech P2P lending is a technology platform that digitally brings together borrowers (SMEs) who need business capital with lenders who expect competitive returns (Paikoh et al., 2021). P2P lending has a unique advantage of being able to carry out interface functions through off-balance sheet funding. The services are also more flexible and can allocate capital or funds to almost anyone, at any amount, effectively and transparently, and with low interest. The biggest fintech players in Indonesia are payment and lending. The existence of fintech opens greater opportunities for household consumers and the business world, including SMEs to access financial services. In addition, fintech also offers convenience, speed of service, lower costs and convenience for consumers in enjoying financial services. The most important implications and dividends from the various benefits of fintech are financial inclusion. This is expected to further promote sustainable economic growth and allow diversification of exposure to overall investment risk. Artono (2021) has explained that fintech P2P lending is a financial service that utilizes digital technology to bring together parties who need loans and parties who are willing to provide loans digitally. Information technology plays an important role in the existence of fintech, which is based on Article 1 number 5 POJK No. 77/ POJK.01/2016 concerning Information Technology-Based Borrowing and Lending Services. Information technology is a technique for collecting, preparing, storing, processing, announcing, analyzing, and/or disseminating information in the field of financial services. The fintech mechanism is based on Article 1 number 6, number 7, POJK No. 77/POJK.01/2016. The system of fintech administrators will bring together the borrower and the party that provides the loan, so that fintech P2P lending is a marketplace for lending and borrowing money online. By referring to the current situation, Tang et al. (2021) have observed that the fintech sector has been very active in the past year despite the COVID-19 pandemic. In fact, it may even be said that the pandemic has given Indonesia’s fintech sector an even bigger push as more people turn to digital solutions to carry out their daily activities. Businesses have accelerated their adoption of technology to adapt to, and survive in, the “new normal”. E-commerce transaction volumes have also increased exponentially, contributing to the increased use of digital payments and online lending platforms. To secure their place in Indonesia’s growing digital economy, fintech players from financial institutions to digital platforms have been carrying out a range of activities. These include fundraising, bolt-on acquisitions to expand their offerings, entering commercial collaborations with other players, and even exploring consolidation options by merging with competitors. The regulators have also become more

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alive to the relevant issues in the sector as well as the potential pitfalls. They have therefore updated the fintech regulatory framework by updating existing regulations and issuing new ones, and by preparing several draft regulations currently under consultation. These include regulations on peer-to-peer lending, payments, equity crowdfunding and digital banking. As always, the key would be to strike a balance between protecting customers and preventing an adverse impact on the country’s economy (in particular, the potential systemic risks that the fintech sector may pose to the broader economy) on the one hand, while still encouraging innovation and ensuring that the businesses continue to be agile on the other hand. The ongoing need among Indonesians (particularly the “unbanked”) for credit and the strict regulatory framework associated with traditional lending services have meant that P2P lending platforms are still very popular in Indonesia. These lending platforms are also increasingly being integrated into e-commerce platforms. According to an OJK statement, in 2020, loan disbursements via P2P Lending platforms stood at IDR155.9 trillion – an increase of 91.3% on 2019, when the figure was IDR81.49 trillion. Many of these loans were distributed to micro, small and medium enterprises in urgent need of liquidity due to the COVID-19 pandemic. Under the current OJK regulation on P2P lending (OJK Regulation No 77/ POJK.01/2016), OJK adopts a two-stage licensing process for P2P lending players: registration followed by licensing. As at 22 December 2020, there were 149 P2P Lending companies, of which 112 were registered with OJK and 37 licensed by OJK. In addition, OJK has increased its efforts to stamp down on P2P lending platforms operating illegally (without registration or a licence), which have tarnished the reputation of P2P lending platforms generally by adopting aggressive debt collection strategies and improperly collecting data from their users. Based on an OJK press release dated 25 September 2020, a total of 2840 illegal P2P lending platforms were blocked in Indonesia between January 2018 and September 2020. Given the large number of fintech P2P lending companies and the potential impact of non-performing loans, OJK has reviewed the licensing process for fintech P2P lending companies, and is expected to issue a new P2P lending regulation to simplify licensing into a single-stage process but with more stringent requirements. Under the contemplated regime, there will no longer be a registration stage, and companies will need to directly apply for a P2P Lending licence. The draft OJK regulation on P2P Lending also seeks to introduce several other key changes to the licensing requirements for P2P lending companies, by increasing the minimum paid-up capital for licensed P2P lending companies from IDR2.5  billion to IDR15 billion, by changing the scope of activities that can be facilitated on a P2P lending platform (from general loan arrangements to productive financing and multi-financing activities), and by requiring controlling shareholders, directors and commissioners to pass OJK’s fit and proper test. There is also a new requirement for P2P lending company shareholders that are foreign legal entities to be engaged in the financial services sector. Once this regulation comes into effect, these new requirements are likely to attract more specialised investors with the relevant financial services experience who are able to meet the relevant qualification

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requirements, and also (if the new rules are properly applied) improve the level of governance of P2P lending companies. P2P lending sees phenomenal growth in loan disbursements, largely to MSMEs (Fintech News Network (2021). According to the MSME Ministry, Indonesia had 64 million MSMEs in 2018, of which 63 million are micro businesses. The MSME sector has absorbed 97% of workers, thereby contributing 61% to the country’s gross domestic product. These MSMEs are highly underserved as they are costly to serve due to lack of credit information and history. According to the government*, around 41 million MSMEs have access to credit from financial institutions while 23  million are not bankable. According to Asian Briefing**, only eight million MSMEs have an online presence. In 2019/2020, increased P2P lending companies develop AI-powered credit scoring models and alternative lending solutions to serve the large, underserved population. As per 2020, total funding from P2P platforms reached IDR 113.46 trillion (USD7.7  billion) with close to 26  million borrowers, from over 160 fintech companies listed with the OJK, according to data from Bank Indonesia. The P2P industry is resilient in Indonesia’s rapidly growing fintech industry, representing 51% of the country’s fintech companies. It has attracted the attention of local and foreign investors who have poured millions into fintech startups in 2019/2020. Leading Indonesia lending fintech are gaining traction in raising funding capital. Fintech News Network (2021) have listed the following impact of COVID-19 on fintech P2P lending in Indonesia. 1. Surging online loan demand. The online lending industry is already registering a rise in demand. Small businesses or gig workers experience direct impacts and need quick microloans to stay afloat during the pandemic. 2. Increased risk of non-performing loans. P2P lending platforms are struggling with risky loans as loan restructuring requests surged. Nonetheless, the integration of Fintech Data Centre (FDC) is able to press even better against NPL risks. 3. Decline in funding. Investors are becoming more cautious and risk averse. Lending start-ups postpone launches and adjust priority to protect business, employees, and customers. 4. Impact on partnerships. Lending fintech faces delays in collaborations especially when it involves governmental institutions with layered bureaucracy. Partnerships between fintech and businesses also impacted due to postponing business plans. 5. Push for more online services. Restricted social distancing and business operations offer fintech lending the advantage over conventional financial institutions. Fintech lending companies do not require any physical interactions. 6. Enable technology. As the risks of non-performing loans increased, fintech lending increased digital tech adoption such as e-KYC and new demand for ecosystem like APIs.

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5 Conclusion This chapter has discussed the technology entrepreneurship resulting from fintech lending. This is an important area of the global economy that is dramatically changing the business landscape. The impact of fintech lending in the specific country context of Indonesia was stated. This is important given Indonesia has one of the world’s largest population and has an active startup community.

References Accenture. (2021). Leaders wanted  – Masters of change at a moment of truth. Technology Vision 2021. Adam, N. A., & Alarifi, G. (2021). Innovation practices for survival of small and medium enterprises (SMEs) in the COVID-19 times: The role of external support. Journal of Innovation and Entrepreneurship, 10(15). Agarwal, S., & Zhang, J. (2020). FinTech, lending and payment innovation: A review. Asia-Pacific Journal of Financial Studies. Artono, H. B. (2021). Legal aspects on financial technology (Fintech) peer to peer (P2P) lending that declared illegal by Otoritas Jasa Keuangan (OJK). ICLSSEE 2021, March. Salatiga. Australian Small Business and Family Enterprise Ombudsman (ASBFEO). (2018). Borrowing from Fintech lenders – What do I need to know? Canberra. Bailetti, T. (2012). Technology entrepreneurship: Overview, definition, and distinctive aspects. Technology Innovation Management Review, February. Barkley, B., & Schweitzer, M. (2021). The rise of Fintech lending to small businesses: Businesses’ perspectives on borrowing. International Journal of Central Banking, 17(1), 35–65. Cornelli, G., Frost, J., Gambacorta, L., Rau, R., Wardrop, R., & Ziegler, T. (2021). Fintech and big tech credit: What explains the rise of digital lending? CESifo Forum 2, 22, 30–34. Deloitte. (2020). Fintech – On the brink of further disruption. Finkle, T. A. (2018). Technology entrepreneurship: Creating your own online business. Journal of Technology Research, 8. Fintech News Network. (2021). Indonesia Fintech report 2020. Singapore. Giones, F., & Brem, A. (2017). Technology entrepreneurship: A definition and research agenda. Technology Innovation Management Review, 7(5). KPMG. (2018). The Fintech edge (1st ed.). Peer-To-Peer Lending. Mosey, S., Guerrero, M., & Greenman, A. (2017). Technology entrepreneurship research opportunities: Insights from across Europe. Journal of Technology Transfer, 42, 1–9. Najaf, K., Subramaniam, R. K., & Atayah, O. F. (2021). Understanding the implications of FinTech peer-to-peer (P2P) lending during the COVID-19 pandemic. Journal of Sustainable Finance & Investment. Najib, M., Mukhamad, W. J. E., Fahma, F., Endri, E., & Suhartanto, D. (2021). FinTech in the small food business and its relation with open innovation. Journal of Open Innovation: Technology, Market, and Complexity, 7(88). Nemoto, N., Storey, D., & Huang, B. (2019). Optimal regulation of peer-to-peer lending for SMEs. Tokyo: ADB Institute. Paikoh, E., Wisynu, A. G., Destyana, E. P., & Dian, I. P. (2021). The readiness of rice farmers in Malang to utilize financial technology (Fintech). Russian Journal of Agricultural and Socio-­ Economic Sciences (RJOAS), 2(110), 56–64. Pratama, J. (2021). Analysis of factors affecting trust on the use of FinTech (peer to peer lending) in Indonesia. Jurnal Sistem Informasi dan Komputer (SISFOKOM), 10(01), 79–85.

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PwC. (2019). Fintech lending: One of the Key enablers for financial inclusion. PwC Indonesia. (2019). Indonesia’s Fintech lending: Driving economic growth through financial inclusion. Fintech Series. Santoso, W., Trinugroho, I., & Risfandy, T. (2020). What determine loan rate and default status in financial technology online direct lending? Evidence from Indonesia. Emerging Markets Finance & Trade, 56, 351–369. Soltanifar, M., Hughes, M., & Gocke, L. (Eds.). (2021). Future of business and finance: Digital entrepreneurship impact on business and society. Springer. Suryono, R.  R., Budi, I., & Purwandari, B. (2021). Detection of Fintech P2P lending issues in Indonesia. Heliyon, 7. Tambunan, T., Santoso, W., Busneti, I., & Batunanggar, S. (2021). The development of MSMEs and the growth of peer-to-peer (P2P) lending in Indonesia. International Journal of Innovation, Creativity and Change, 15(2), 585–611. Tang, V., Arwiko, T., & Virgiany, M. (2021). Fintech  – Indonesia: Trends & developments. Chambers Global Practice Guide. UNCTAD. (2021). Catching technological waves: Innovation with equity. Technology and innovation report 2021. New York: United Nations Publications.

Entrepreneurship Landscape of Translating Business in Indonesia: An Observation and Online Survey During Covid 19 Pandemic Ina Sukaesih, Endang Purwaningrum, Petrus Usmanij, and Vanessa Ratten

Abstract  Translating enterprises in Indonesia has not been affected by the Covid-19 pandemic. The work procedure of a translator is in line with the health enforced by the Indonesian government that urge people to avoid from community gathering and maintain social distancing. The Indonesian public is very supportive in the development of the translating field that is on high demand and provides opportunities in creating jobs. This chapter describes the authors’ observation on the prospect of translating entrepreneurship in Indonesia including its business opportunity, the translator’s competencies, and the efforts required in improving the quality of translator in Indonesia. An indepth opinion survey was also organized by the authors using Whattsapp involving Indonesian translating actors who translate during the Covid 19 pandemic. A number of websites related to translation business have been observed and included in this chapter in order to gain insights on translation service quality, competencies and information on the translation fees. The chapter concludes that the translation business in Indonesia is still very promising and becomes one that absorbs of the Indonesian translating workforce that will get demographic bonuses in the next few years. This chapter is expected to provide a quick report on the current development of the translation business in Indonesia in order to create awareness and to attract attention from the public especially those parties associated with translation service. Keywords  Translator · Interpreter · Entrepreneurship · Translating service · Online opinion survey

I. Sukaesih · E. Purwaningrum · P. Usmanij Politeknik Negeri Jakarta, Depok, Indonesia e-mail: [email protected]; [email protected]; [email protected] V. Ratten (*) La Trobe Business School, La Trobe University, Melbourne, VIC, Australia e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 V. Ratten (ed.), Entrepreneurial Innovation, Studies on Entrepreneurship, Structural Change and Industrial Dynamics, https://doi.org/10.1007/978-981-16-4795-6_15

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1 Introduction One business in Indonesia that has not been affected by the Covid-19 pandemic is the translating enterprise. A translator does not have to leave the house to do his/her translating job, but just to sit back and relax at home facing a laptop or PC and do the translation. After finishing the work, the translator just needs to send the results by email and wait for the client to transfer of payment for the work. The work procedure of a translator is in line with the health enforced by the Indonesian government that urge people to avoid from community gathering and maintain social distancing. Translating business can be classified as a promising field for business entrepreneurs with a bright prospect, as publicly disclosed in Situmorang, 2021, infopeluangusaha.org, Situmorang (2021), bisnisukm.com, and kompas.com. Multinational companies have forced their Indonesian staff members to interact in English and or in other languages, since their foreign counterparts are certainly not fluent in communication using Bahasa Indonesia. Unlimited job opportunities in this era of globalization and transparency dictate every institution, whether it is a government agency or a private institution, to publish the publicly available information on a daily basis. Translating business in Indonesia is highly demanded by both the government and the private sectors. Almost all Indonesian government agencies require translation service as enforced by the Regulation of the State Minister for Utilization of State Apparatus Number: PER/24/M.PAN/5/2006 concerning The Functional Position of Translators and their credit score. This regulation requires the availability of civil servant formation as a translating functional force for placement in various government agencies both in the central and in the regional levels. In addition to government agencies, private institutions that conduct business cooperation with outside companies require bilingual mastery that can be bridged by translators (Sukaesih & Khairas, 2015). The need of translators that have been supported by the regulation of the Minister of Administrative Empowerment of the State, is still not positively welcomed by other government institutions, such as the employment department and the legal department. On the Ministry of Manpower’s web, there is no list of translating agencies. On the website of the Ministry of Law and Human Rights, the list of translation agencies that have complied with aspects of legality in Indonesia is not accessible. Nevertheless, despite the discouraging fact, the public is very supportive in the development of the translating field that is in fact on high demand and in providing opportunities in creating jobs. This is evidenced by the translators’ animo in promoting themselves as professional translators. On social media, the translation services promotion, both agencies and individuals, offer translation services from English and other foreign languages to Bahasa Indonesia and vice versa. This chapter describes the authors’ observation on the prospect of translating entrepreneurship in Indonesia including its business opportunity, the translator’s competencies, and the efforts required in improving the quality of translator in Indonesia. Quick online observations were conducted and an indepth opinion

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survey was organized by the authors using Whattsapp involving Indonesian translating actors who translate during the Covid 19 pandemic.

2 Research Methodology The authors have conducted a short observation and an indepth quick online opinion survey using Whatapps involving five key respondents between the 19th until the 27th May 2021. The key respondents are coded Respondent 1 (R1), Respondent 2 (R2), Respondent 3 (R3), Respondent 4 (R4), and Respondent 5 (R5). Table 1 summarizes the respondent description and the questions asked during the online opinion survey. The opinions of the respondents have been extracted and included in the chapter. A number of websites related to translation business have been observed and included in this chapter in order to gain insights on translation service quality, competencies and information on the translation fees. The selected websites are kompas.com, Kompasiana (2010), Penerjemah Tersumpah, and bisnisukm.com. Two Indonesian translation associations such as AICI (Association of the Indonesian Conference Interpreters) and HPI (Association of the Indonesian Translators) have been included in this research to observe issues related to translation business. A few Indonesian Government Decision and Regulations that are relevant to the translation and interpretation activities are observed and included in this chapter such as the Regulation of the Minister of State for the Utilization of State Apparatus, the Decision of the Minister of Manpower, the Regulation of the Ministry of Justice and Human Rights, and the regulation of the Ministry of Education and Culture of Table 1  The respondent list of the online opinion survey Date of Code survey R1 19/5/2021

R2

21/5/2021

R3

24/5/2021

R4

27/5/2021

R5

24/5/2021

Respondent description Question asked A student who promoted her independent Do you promote your translating business on social media interpreting business using social media? A translator and an alumnus who works How many translated documents as a translator in a company you complete in a day? The Secretary of the Indonesian How many licensed translators Translator Association (HPI) are members of the Indonesian Translator Association? How many members does AICI The Deputy Head of External Relation have? Are all members licensed? and Professional Development of AICI (Association of Indonesian Conference Interpreters) What is your view on the income A professional translator that has been difference between an academic working for longer than 30 years but and a professional translator? without formal educational background

Source: Author’s own

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the Republic of Indonesia. The results of the observation and the survey are analysed and outlined, intertwiningly with the discussions.

3 Business Opportunity of the Translating Service The job opportunity in translating business is still widely opened as triggered by global needs and domestic needs. Borderless nations have caused high interactions between countries in various sectors. Translating service has become an indispensable part of the running of ministries and government institutions in Indonesia (Pamungkas, 2018). The presence of translators and interpreters in many government institutions and ministries Indonesia is now quite common. The government institutions require translators in the areas of politics, economics, business, entertainment, education, social and cultural. In the global era, each country is involved in bilateral or multilateral interaction with other countries and requires an interpreter or a translator. Written documents such as Presidential speech, government regulations and policies, and decrees must be translated to English or other languages for publications. Government related documents are translated to other languages by a group of translators associated with the State Cabinet Secretary office. The Indonesian Government has formed a division in the State Cabinet Secretary office that handles government translating services. Oral translation is needed during direct face-to-face interaction. Government agencies requires the service of a translator for the President of the Republic of Indonesia to interact with other country leaders or delegates, or to deliver a speech in multinational and international events, or for a minister in a bilateral or multilateral discussion with other ministers of other countries in relation to new regulations or policies, or for a press conference with foreign reporters. As President Joko Widodo has mandated the use of Bahasa Indonesia among high officials, the role of translator has become more significant (Situmorang, 2021). In economics, both government and private sectors require an interpreter and a translator. Business people require translators to translate contract agreement, instruction manuals of new and existing products, and operating manuals of factory machineries and computer equipment. An interpreter is often needed when business people interact with their overseas counterparts in a meeting, a business dinner, or in a business negotiation. Despite the importance of translating service, it only provides a small contribution to the economics and business sectors. In the area of education, translating service is also highly on demand in particular in translation of English textbooks to Bahasa Indonesia for Indonesian students and their teachers to use. The fact that the science knowledge is still dominated by European countries and the US has opened opportunity for translators to translate English textbooks or other resources to Bahasa Indonesia. Kompas.com website in 2010 reported 80% of science books in Indonesia are originally translated from English. Indonesian book publishers have no choice but the publish more translated books to support educational institutions in teaching their students in the areas of

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medical science, engineering and business or economics in order to fulfill the need of academic community. This has triggered more demand of translating service in academia, not only textbooks but also journal articles and industrial and/or government reports. One of the tasks of an academic is to publish articles in English in reputed international journals. Currently, all local Indonesian academic journals have forced their authors to include an abstract written in English. Also, in terms of academic promotions, a lecturer is required to have published his/her journal article internationally. University students in Indonesia are also now required to publish their articles as part of their study program in masters and doctorate levels. In addition to that, the Indonesian Government has prioritized the use of Bahasa Indonesia in article writing for seminars in Indonesia or internationally which creates a positive indirect impact to the increasing need of an interpreter. In entertainment sector, the role of a translator and an interpreter has becoming more important. Translated English novels, comic books, poems, literatures, popular scientific books, and other entertaining reading materials are abundantly available for consumption by Indonesian readers. The translated version of the Harry Potter novels by J.K. Rowlings and the Sinchan comic books are available in the famous book shops in many cities of Indonesia such as Gramedia is one example of the fast-growing translation business in the country. The supply of resources is at this moment plentiful. In film industry, subtitling and dubbing by an interpreter or a translator have contributed significantly to meeting the demand of audiences who are interested to watch English movies or documentaries or international news. Subtitling has been practiced not only by a licensed translating bureau but also by the unlicensed individuals. Based on the above aspects that demonstrated the need of translation, it is conclusive that the opportunity of the translating business is significant and has a promising future prospect (Kompasiana.com, 2015). Situmorang (2021) reported that the demand for translating service during the Covid-19 pandemic has been rapidly increasing.

4 Translating Competencies Competencies are the competitive advantage and the most important factors for translators or interpreters to be successful in running the translation business sustainably. Other factors that are supporting the translation business are tools and resources such as an electronic translating equipment or CAT (computer-assisted translation). Competencies can be measured from the output of the translating service as well as from customer satisfaction level. The output measure in translating business is strongly associated with the linguistic skills of the translator/interpreter in the source language and in the target language. One that has bilingual skills of Bahasa Indonesia and English has a potential of being English-Indonesia translator or interpreter. Bilingual skills must also be equipped with other competencies such as knowing effective method and strategy, having contrastive ability, having

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extralinguistic skill, having occupational knowledge, skilful in using supporting tools/computer equipment, and problem-solving skills (Albir, 2015). Knowing effective method and strategy is a competence demonstrated by the translator’s consciousness and awareness of the impact that translation output will bring. This fact has not been studied entirely although it may contribute greatly to improvement or enhancement of competencies of a professional translator in developing effective method and strategy. The Indonesian Translator Association members have conducted workshops and seminars on learning effective method and strategy in translation business. Contrastive skill is the ability of a translator or interpreter in contrasting the source language and the target language comprehensively. One that has a solid bilingual skill can understand and respond to a conversation quickly and accurately. New beginners need to develop a contrasting skill in order to be able to respond instantly in a quick conversation. Not only the language that must be learned, but also the cultural context of the language that attached to it. This type of competence is called extralinguistic skill or the pragmatic aspect of the language. For example, the word “you” is translated to Bahasa Indonesia as “anda” which is considered as too formal if used in addressing a close friend or relative. Occupational skill is another competence that a translator must possess in particular in knowing job or business context of a client. A translator must know the market of the translation business, its demand, its client’s business context, how to negotiate with the translating fee, the impact of its translation and so on. A capability in using translating tools that help in the translation process is also a needed competency. Translators may already have had experiences of using translation tools such as Google Translate or SDL Trado Studio. Translators must have the ability to operate a computer to send and receive emails in their business. This capability greatly helps the translation process as well as the completion of the client’s business process. The last competency of a translator is problem-solving skill. This competency is useful when problems arise in the translation process. Problem-solving skill relates to the type of text translated and its adjustment to the target reader. For example, whether the text of a story will remain as a text, or whether it becomes an essay. Such decisions require sufficient knowledge and/or experience in dealing with various problems. There are diversed competencies of translators in Indonesia from the point of view of their educational background and working experiences. One result from an observation that the authors conducted found a professional translator (Respondent 5, 2021) that has been working for longer than 30 years but without formal educational background has been very successful in her business as a translator and has developed a strong market segment. R5 only need to rely on her language intuition in translating so that the output is highly and easily understood by the target client. On the other hand, a new beginner such as a fresh graduate of an English language program (R1) will tend to promote her translating service via social media to individual or group of clients (Respondent 1, 2021). Of course, as a fresh graduate, R1 is still looking for employment as professional translator. Meanwhile, R2 is an

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alumnus of the Politeknik Negeri Jakarta, who majored in translation who is already working in the translation bureau and in other companies, stated that on average she completes between 10 and 15 pages per day and mostly face technical constraints such as specific vocabularies (Respondent 2, 2021).

5 Legality of Translators The legality of translators in Indonesia is still not thoroughly attracting attention of the Government, translation clients and of themselves. The government under the Ministry of Justice and Human Rights is in fact responsible for the legality of translators who are individual translators or translation bureaus. The legality of translators working with publishers is taken care of by the publishers. Meanwhile, individual translators’ and bureaus’ legality needs further traceability and affirmation. Most established translation bureaus have already had legality, while the new are still in the process of getting one. Legalization of translation is very important and required by various parties’ involvements such as translators, customers, publishers (or the order givers), and the Indonesian Government. Legalization becomes a fundamental element from the legal ground especially when a conflict exists between two or more parties. It is not impossible, especially in politics and economics, to produce a significant transfer of meaning, although little, that may create a major impact to all parties involved. A large amount of translation work is ideally complemented by employment contracts between translators and customers. However, in accordance with the last article of the contract which usually states if any potential conflicts which cannot be resolved by both parties, then it must be brought to courts under the Ministry of Justice and Human Rights. In other words, the Indonesian Government should start improving the legality of the translation sector.

6 Translating Profession The Regulation of the Minister of State for the Utilization of State Apparatus Number: PER/24/M.PAN/5/2006 has provided the establishment of the profession of translator which was previously considered “not a profession”. Translators have functional positions with clear credit point rules. The functional levels of translator for government employee are: (i) First Translator; (ii) Young Translator; (iii) Intermediate Translator; and (iv) The Master Translator. The leveling of functional translating for Government officials is determined by the level of education and training, and the development of the translation professionalism. Everything is considered to be a credit point. The achievement of certain credit points allows translators to be promoted to a higher position.

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The term sworn translator was originally organized by the Indonesian Capital Territory Government of Jakarta in collaboration with LBI or the Indonesian Language Body of Universitas Indonesia. Currently, in 2021, LBI has been taken over by the Ministry of Manpower that has completed the Indonesian National Work Competency Standard for translators as stated in the Decision of the Minister of Manpower Number 23/2021. Oral translation is no less supportive by the Indonesian Government programs under the Language Agency drafted Decision for Oral Translation (Badan Pengembangan dan Pembinaan Bahasa, Kemdikbud, 2021). Meanwhile, HPI or the Association of Indonesian Translator has authority to issue translator certification. HPI organizes two types of certificates based on the type of manuscript such as legal manuscript and general manuscript. R3 is the Secretary of HPI explained that from the listed HPI certified translators in 2019, there are 300 names listed, including translators of general manuscripts and legal manuscripts, whereas the total number of HPI members to date is 3400 people (Respondent 3, 2021). There are 70 members of the Association of Indonesian Conference Interpreter or AICI but not all are certified and there are only three people who have gained international recognition (AICI website, 2021). A collaborative effort between the Indonesian Government and HPI in providing trademarks for translators have provided an enlightenment to the translator profession. However, there are still many uncertified translators that can be found around university campuses operating in a small kiosk and selling translation services. A big question remains unanswered as to who is responsible for their existence and for the quality of their translating service. Can the “street translators” operate without certification issued by authorised professional body?

7 Translation Service Fee In this study, the authors also collected data from the online survey related to the translation service fee. An unlicensed site of entitled Penerjemah Tersumpah or the sworn translator listed its translation service fees of IDR 75,000–500,000 (or equivalent to AUD 7.50–50.00) per page for legal document and for general document translations (Penerjemah Tersumpah website, 2021). The price range is dependent upon the language translated, where English is the cheapest, but the Dutch translation is the most expensive one. This significant fee gap is caused by the rarity of the Dutch translators in Indonesia. Meanwhile, the fee for legal manuscripts is calculated based on the number of words and the use of language. Translating English general manuscripts costs IDR 400.00 (or equivalent to AUD 0.40) per word. Translating Thai and Vietnamese general manuscripts costs Rp. 800.00 (or equivalent to AUD 0.80) per word (Penerjemah Tersumpah website, 2021). At the AICI websites, the fees for interpretation are more stable as the cost driver is either per day or per half-day, ranging from IDR 3,000,000–7,000,000 (AICI Chairman Presentation, 2021).

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HPI has its own fee calculation, referring to the terms of translation fee from the Ministry of Finance Repubik Indonesia (Peraturan Menteri Keuangan, 2019). The translation fee from foreign languages to Bahasa Indonesia and vice versa ranges from IDR 250,000 to 450,000 (or equivalent to AUD 25–45) per page. Additional fees may apply to certain manuscripts such as medical, legal, and legal documents as agreed upon by translators and clients. While the translation fee from Bahasa Indonesian to other languages is less, amounting to IDR 174,000 (or equivalent to AUD 17.40) per page (HPI website, 2021). The translation fees for publishing companies are slightly different and cost between IDR 10,000 and 50,000 (or equivalent to AUD 1–5) per page (Syafiatudina, 2011). The translation fee pad to professional translators is astonishing. From one translation contract, a pro can earn between hundreds of millions to billions of Indonesian Rupiah (Respondent 5 or R5, 2021). This shows a chasm of difference in translation income between the pros and the amateurs.

8 Problem Solving In the previous section it was reported that low competencies caused the low number of certified translators who are members of HPI. One attempt that can be done is by running translating and interpreting education institute that is fully supported by the Indonesian Government and the associated institution, such as HPI and AICI, and the industry that consumes the translating service. At the moment Politeknik Negeri Jakarta has initiated the attempt by opening a translation study program for business communication and the professionals in 2019. This study program needs to be supported by other translation education institutes in Indonesia and in overseas, local translation associations, the industry and the Indonesian Government. In addition, the public perception that seems to recently “recognize” the translator profession is due to the Indonesian Government’s action in forming some functional positions of translators that are recognized by the issuance of the Ministry of Foreign Affairs regulations in 2006. The regulations need to be followed up with reform measures in the aspects of legality and coaching that include groups not only the state civil apparatus but also the private groups and micro, small and medium enterprises (MSMEs) in the field of translation. The Indonesian Government should also draw up additional regulations that can bring the fee gap between high and low fees closer.

9 Conclusion Translation business in Indonesia is still very promising and becomes one that absorbs of the Indonesian translating workforce that will get demographic bonuses in the next few years. The entrepreneurial characteristics of the translation business

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are in line with the health protocols in the Covid-19 pandemic in Indonesia that allow a translator to work from home. Competency development skill and coaching are needed by new beginners to fulfil the market demand of translating service. As a labor-absorbing prospect, translating entrepreneurs require guidance from upstream to downstream from their more senior fellow translators, educational institution, translating training centres, relevant associations and the industries that employ translating service. Furthermore, the Indonesian Government supports and attentions for translating and interpreting business are needed in improving the translation entrepreneurship in Indonesia. This chapter is expected to provide a quick report on the current development of the translation business in Indonesia in order to create awareness and to attract attention from the public especially those parties associated with translation service. A glimpse observation and short indepth online opinion survey employed in the research methodology may give the impression of an honest simplicity, but the authors have endeavoured to get as close as possible to the grassroot level of the translation business in Indonesia during the most challenging time of the Covid 19 pandemic.

References AICI Chairman Presentation. (2021). http://www.the-aici.org/ as accessed on 27th May 2021. Albir, A. H. (2015). The acquisition of translator competences. competences, tasks, and assessment in translator training. Meta Erudit, 60(2), 256–280. Badan Pengembangan dan Pembinaan Bahasa, Kemdikbud. (2021). Kementrian Pendidikan dan Kebudayaan Republik Indonesia. RSKKNI Juru Bahasa Lisan, as viewed on http://badanbahasa.kemdikbud.go.id/lamanbahasa/ on the 26 May 2021. Bisnisukm.com. (2021). Prospek usaha penerjemahan as viewd on https://bisnisukm.com/ on the 26 May 2021. HPI (Himpunan Penerjemah Indonesia). (2021). Tariff Biaya Penerjemahan as viewed on https:// www.hpi.or.id/ on 27 May 2021. Kompasiana. (2010). 80% Buku Hasil Terjemahan as viewed on https://edukasi.kompas.com/rea d/2010/02/15/07530181/~Edukasi~News on the 26 May 2021. Pamungkas, M.  E. (2018). Translators as international journalists. Conference proceedings of Universitas Petra, Surabaya Indonesia, May 8–9, 2018, Language in the Online & Offline World 6: The Fortitude, pp. 194–200. Penerjemah Tersumpah. (2021). Tariff Biaya Penerjemahan as viewed on https://www.penerjemahtersumpah.com/ on the 26 May 2021. Peraturan Menteri Keuangan PMK No. 78/PMK.02 Tahun 2019. Perubahan Standar Biaya Masukan Tahun Anggaran 2020 yang mengatur Satuan Biaya Penerjemahan dan Pengetikan, page 82 point no. 5, as viewed on https://jdih.kemenkeu.go.id/fullText/2019/78~PMK.02~2019Per.pdf on the 26 May 2021. Prospek Menjanjikan di Bisnis Penerjemahan Bahasa. (2021). As viewed on https://www.kompasiana.com/direktori-­penerjemah-­indonesia/55175e52a333114 on the 26 May 2021. Situmorang, P. (2021) Tak Goyah Pandemi Covid-19, Bisnis Penerjemah Bahasa Tetap Kebanjiran Order as viewed on https://investor.id/ on the 26 May 2021. Sukaesih, I., & Khairas, E. E. (2015). Laporan Penelitian, UP2M. PNJ. Syafiatudina. (2011). Diskusi: Penerjemahan di Indonesia: Sejarah dan Tantangan, as viewed on http://kunci.or.id/ on 26 May 2021.