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Linkage Formation by Small Firms: The Case of A Rural Cluster in Indonesia

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  • Yuri Sato

Abstract

This paper analyses forward linkages formed by small firms in Ceper, a rural metal-casting cluster in Central Java, and examines the effects of these linkages in promoting the firms' development. Firms in the cluster have developed subcontracting linkages with assemblers in the urban modern sector, and putting-out linkages with wholesalers located in the cities. The linkages provide benefits beyond product sales: some firms are stimulated to improve technological capabilities through subcontracting linkages with assemblers; others are supported by trade credits embedded in linkages with wholesalers. In comparing these effects with external assistance, the firms rate technological help from private institutions with a business orientation more highly than that from assemblers, and support from wholesalers more highly than any other source of financial assistance. Government assistance receives a relatively low rating. There is little evidence of effects of clustering, partly because firms consider linkages with the outer economy more strategic.

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Bibliographic Info

Article provided by Taylor and Francis Journals in its journal Bulletin of Indonesian Economic Studies.

Volume (Year): 36 (2000)
Issue (Month): 1 ()
Pages: 137-166

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Handle: RePEc:taf:bindes:v:36:y:2000:i:1:p:137-166

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References

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  1. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
  2. Lall, Sanjaya, 1980. "Vertical Inter-Firm Linkages in LDCs: An Empirical Study," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 42(3), pages 203-26, August.
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Citations

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Cited by:
  1. Hayashi, Mitsuhiro, 2002. "The role of subcontracting in SME development in Indonesia:: Micro-level evidence from the metalworking and machinery industry," Journal of Asian Economics, Elsevier, vol. 13(1), pages 1-26.
  2. Albert Berry & Edgard Rodriguez & Henry Sandee, 2001. "Small And Medium Enterprise Dynamics In Indonesia," Bulletin of Indonesian Economic Studies, Taylor and Francis Journals, vol. 37(3), pages 363-384.
  3. Tambunan, Tulus, 2008. "Development of Rural Manufacturing SME Clusters in a Developing Country: The Indonesian Case," Journal of Rural Development/Nongchon-Gyeongje, Korea Rural Economic Institute, vol. 31(2), May.
  4. Tulus Tambunnan, 2007. "Trade and Investment Liberalization Effects on SME Development: A Literature Review and a Case Study of Indonesia," Working Papers 4207, Asia-Pacific Research and Training Network on Trade (ARTNeT), an initiative of UNESCAP and IDRC, Canada..
  5. Ruan, Jianqing & Zhang, Xiaobo, 2008. "Finance and cluster-based industrial development in China:," IFPRI discussion papers 768, International Food Policy Research Institute (IFPRI).
  6. Hill, Hal, 2001. "Technology and Innovation in Developing East Asia: An interpretive Survey," Departmental Working Papers 2001-11, The Australian National University, Arndt-Corden Department of Economics.

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