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Creative Kampongs: Mobilising Informal Enterprise and Innovation for Economic Development in Indonesia

Creative Kampongs: Mobilising Informal Enterprise and Innovation for Economic Development in Indonesia

Principal Investigator: Professor Nicholas Phelps, University College London

April 2017 update

Blog: Schumpeter versus Geertz

Look closely at the poster for ‘Solo entrepreneur days’ contained in the picture below. One can see perhaps the stereotypical image of the heroic Schumpeterian entrepreneur so assumed in much of the literature on the economics of innovation - a man in a suit doubtless running a formal business of some description. Yet the same picture is taken looking over the shoulder of an entrepreneur more numerous and representative of a country like Indonesia. The street food hawker in the foreground of the picture is a man but might equally be a woman and certainly will not have a legally registered business. The juxtaposition in the picture is instructive for all that it reveals of the purchase of academic thought on the reality of earning a living across the global south: which of these two figures provides the best guide to understanding the true extent and nature of business innovation across the global south?

 Entrepreneurship in Indonesia








For economists, and even evolutionary economic geographers, the Schumpeterian entrepreneur and the radical innovations made by formal businesses are central to processes of creative destruction. Yet there is ample evidence that much informal business across the global south is at best only incrementally innovative and rarely can benefit from the external economies and increasing returns to scale so celebrated in mainstream economics. The picture across the vast majority of informal businesses that dominate in the global south is one of involution - a term used by Clifford Geertz in the Indonesian setting.

Place is important here too since the strong social bonds that can characterise the often informally developed neighbourhoods or kampongs in Indonesia have an ambiguous relationship to processes of innovation among informal businesses. On the one hand, the social cohesion found at the neighbourhood level could represent significant social capital with which to leverage the sorts of collective efficiencies thought to be available to clusters of businesses. On the other hand this cohesion can - for any number of reasons - represent a significant moderator of, or drag upon, the most radical forms of Schumpeterian innovation in many settings across the global south as the picture below implies. Amidst all the changes affecting Indonesia, the kampong producing the traditional Javanese ceremonial hat or blangkon celebrates the unchanging nature of the product it produces.   

 Entrepreneurship in Indonesia








The reality and important points of policy leverage in Indonesia, as with elsewhere across the global south, may lie somewhere between these two polar views: of evolution borne of creative destruction wrought by Schumpeterian entrepreneurs on the one hand, and the involution of changeless change associated with the stasis, imitation and incremental innovation of informal business, on the other.     



Away from the world cities that comprise a large part of the stock of economic activity globally, many 'ordinary' cities of developing countries nevertheless are home to an inventiveness that is informal and as yet uncharted. In this research we propose to map the extent inventiveness across the informal businesses found in the urban villages (kampongs) in three Indonesian cities (Solo, Bandung and Semarang) to gauge: (a) the extent of innovation; (b) the nature of innovation (incremental/radical, new to individual, new to market); (c) the originators (male or female) and the origin (endogenous or adapted, business or household); (d) the impacts; and (e) the aspirations of entrepreneurs. In light of (e) we also propose to explore in outline terms the potential for these informal business ideas to be commercialized, to form part of alternative social or non-market economies, or indeed for them to be protected against such developments.

The research is important in empirical and policy terms given that the majority of enterprises across the global south are informal in status and organisation. It is important to better understand the dynamics of these informal businesses, their innovativeness and their contributions to economic development, not least in order to better tune policy interventions. This research sits at the intersection of three bodies of literature in three different subject areas – on informal business in development studies, on innovation in economics, and on urban policy and informality in human geography – that rarely have been in much dialogue. The research is important in theoretical/conceptual terms in bringing these bodies of research together.   

Three research teams (P5 based at Universitas Diponegoro, Institut Technologi Bandung and NGO Kota Kita, based in Solo) will study the extent and nature of innovation among informal businesses in three Indonesian cities – Bandung, Semarang and Solo. The research design reflects our interest in the geography of informal enterprise and innovation. Surveys of individual businesses in selected industries in the study cities will pay attention to the importance of intra-urban and inter-urban location to the sustainability of informal enterprise across these three city-regions – paying attention to the role of place.

The research has begun to reveal some of the limits of official, central government creative city policies in Indonesia and we hope to show how innovation and creativity extend well beyond a narrow list of industry sectors to industries considered old or low technology. Yet, set against this, it is clear that much informal enterprise activity remains only incrementally innovative – the potential of industry in many ordinary cities may face important constraints in this regard. Moreover, attention needs to be paid to the variable relationships between the real economic geographies of economic activities, the imagined communities of kampongs and the administered spaces of local government in order to appreciate the potential of informal enterprise and better calibrate policy.   

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