Meningkatkan Kemampuan Untuk Inovasi Dalam Industri Rumput Laut Indonesia: Sebuah Penelitian Eksploratif
IMPROVING THE CAPABILITY FOR INNOVATION IN THE
INDONESIAN SEAWEED INDUSTRY: AN EXPLORATORY
RESEARCH
ADITYA ANDIKA WICAKSONO
GRADUATE SCHOOL
BOGOR AGRICULTURAL UNIVERSITY
BOGOR
2015
DECLARATION*
I certify that the thesis entitled “Improving the Capability for Innovation in
the Indonesian Seaweed Industry: an Exploratory Research” is my original work
and has been fully acknowledged by academic advisors. In addition, I certify that
this copy of thesis has been approved for being available in both University of
Adelaide and Bogor Agricultural University.
I give consent to this copy of my thesis when deposited in the Bogor
Agricultural University library, subject to the provisions of the copyright act. The
author acknowledges that copyright of published works contained within this
thesis resides with the copyright holder(s) of those works.
Jakarta, July 2015
Aditya Andika Wicaksono
NIM F351137011
SUMMARY
ADITYA ANDIKA WICAKSONO. Improving the Capability for Innovation in
the Indonesian Seaweed Industry: An Exploratory Research. Supervised by AJI
HERMAWAN and TITI CANDRA SUNARTI.
The Indonesian government perceives technology issue playing an
important role in improving industrial performance. The government then believes
that technological intervention through particular government programs will help
securing a commodity price. A machinery grant, for instances, has been chosen as
a solution to overcome seaweed problem in many Indonesian regions. However,
the program has showed different result in every place.
All companies under the program tend to perform differently despite being
equipped by same technology. It, however, indicates that technology alone is not
necessarily granting a success. Instead, it indicates another distinctive elements
that company should posses in order to succeed
This research aims to identify key factors that would lead the company to be
successful. It is conducted by comparing two distinctive company performances,
which are successful and less successful state-owned carrageenan (ATC) Industry
in Indonesia. All Data collection is conducted through semi-structured interview.
The research took place both in the company A and B. both companies are
geographically separated. The company A represents a success ATC Company,
which is located in East Sumba. Meanwhile, the company B represents
underperforming company, which is located in East Lombok. All samples taken
are officially under government machinery grant program. This research used
preselected framework in order to generalize the findings.
The researcher views that both of technological and transactional capability
have influenced a company to be innovative (Gamarra & Zawislak, 2013).
Gamarra and Zawislak (2013) says technological capability is an ability to use
technology in order to gain advantage over competitor while the transactional
capability aims the same goals by managing a company expenses. Hence, both
factors are taken into account as a research framework.
The research finds that managerial skills plays important factors in a success
company. It becomes a distinctive factor that distinguish the company A to the
company B. Unlike the company B, the company A is chaired by experienced
manager. It allows the manager showing good managerial skills in the company.
Meanwhile, the manager in company B is inexperienced manager. It allows the
manager showing poor managerial skill in the company. The managerial skill has
actually been a distinctive role in two companies.
Keywords: capability, innovation, machinery grant, technological, transactional
RINGKASAN
ADITYA ANDIKA WICAKSONO. Meningkatkan Kemampuan untuk Inovasi
dalam Industri Rumput Laut Indonesia: Sebuah Penelitian Eksploratif. Dibimbing
oleh AJI HERMAWAN dan TITI CANDRA SUNARTI.
Pemerintah Indonesia menganggap teknologi berperan penting dalam
meningkatkan kinerja suatu industri. Oleh karena itu, pemerintah percaya bahwa
intervensi suatu teknologi dapat memperbaiki harga komoditas. Program
pemberian bantuan alat telah didaulat menjadi salah satu kunci untuk
menanggulangi permasalahan tersebut yang terjadi pada industri rumput laut di
beberapa bagian Indonesia. Namun, pada kenyataanya program tersebut
menunjukkan perbedaan tingkat keberhasilan.
Semua perusahaan yang menerima bantuan tersebut cenderung
menampilkan perbedaan kinerja meski memiliki teknologi yang sama. Hal
tersebut mengindikasikan bahwa teknologi tidak mutlak memberikan kesuksesan
yang sama. Sebaliknya, hal tersebut mengindikasikan adanya kontribusi krusial
dari elemen yang lain terhadap kinerja suatu perusahaan.
Penelitian ini bertujuan untuk mengidentifikasi faktor kunci yang
menyebabkan kesuksesan perusahaan yang menerima bantuan teknologi yang
sama. Pengambilan data dilakukan dengan cara membandingkan performa dari
dua perusahaan Alkali-treated Carageenan (ATC) yang memiliki perbedaan
performa.
Data dikumpulkan melalui wawancara semi terstruktur pada perusahaan
sampel di Waingapu dan Lombok timur. Penelitian ini menggunakan suatu
framework untuk menggeneralisir temuan.
Penelitian ini menunjukkan bahwa kemampuan teknologi dan kemampuan
transaksi erat kaitannya dengan tingkat keinovativan suatu perusahaan. Selain
peran teknologi, penelitian ini menemukan bahwa kemampuan manajerial sangat
berperan dalam kesuksesan suatu perusahaan. Kemampuan seorang manajer
perusahaan sangat berperan dalam memajukan industri yang dipimpinnya.
Pengalaman manajerial yang dimiliki seorang manajer merupakan keuntungan
yang dimiliki oleh perusahaan A dan tidak dimiliki oleh perusahaan B.
Keywords: capability, innovation, machinery grant, technological, transactional
Copyright ©2015, by Bogor Agricultural University
All Right Reserved
1. No part of all of this thesis excerpted without inclusion or mentioning the
sources
a. Excerption only for research and education use, writing for
scientific papers, reporting, critical writing or reviewing of a
problem
b. Excerption does not inflict a financial loss in the proper interest of
Bogor Agricultural University
2. No part of all of this thesis may be transmitted and reproduced in any form
without a written permission from Bogor Agricultural University
IMPROVING THE CAPABILITY FOR INNOVATION IN THE
INDONESIAN SEAWEED INDUSTRY: AN EXPLORATORY
RESEARCH
ADITYA ANDIKA WICAKSONO
Thesis
Submitted to the Graduate School in partial fulfillment of
Master of Science Degree in
Agro-industrial Technology
GRADUATE SCHOOL
BOGOR AGRICULTURAL UNIVERSITY
BOGOR
2015
External Examiner:
Prof. Dr. Marimin, MS
PREFACE
Firstly, I would like to thank Allah SWT for the guidance, which assists me
in accomplishing this research. The paper, however, is deliberately written in
accordance to double degree program between Institut Pertanian Bogor in
Indonesia and University of Adelaide in Australia. Given the reason, it is then
inevitable that there are two exact copies of thesis submitted to each institution.
The author would also like to thank Dr. Aji Hermawan, Dr. Titi Candra, and
Dr. Ron Grill, respectively. Their presence has made writing process easier
through valuable feedback and expertise. Then, it helps the author to finish the
project effortlessly.
At last, the author would abundantly thank family for relentless supports
and patience to get through the time with effortless grace. It is definitely an honor
completing this research. Hopefully, academic society would be a beneficiary of
this research.
Jakarta, July 2015
Aditya Andika Wicaksono
TABLE OF CONTENTS
LIST OF TABLES
vi!
LIST OF APPENDIXES
vi!
1! INTRODUCTION
Background
Problem Statement
Research Objectives
Significance to the field
Limitation
7!
7!
8!
8!
8!
9!
2! LITERATURE REVIEW
Introduction
Definition of company’s internal capabilities
Innovation capability
Transaction Capability
Technological Capability
10!
10!
10!
10!
12!
13!
3! RESEARCH METHOD
Introduction
Setting
Participants
Research Procedure
Data Analysis
16!
16!
16!
16!
17!
18!
4! FINDING AND DISCUSSION
Performance Capability of Seaweed Industry
Influence of Technological Capability on Firm Performance
Influence of Transactional Capability on Firm Performance
19!
19!
20!
24!
5! CONCLUSION AND RECOMMENDATION
Conclusion
Recommendation
28!
28!
29!
REFERENCES
30!
APPENDIXES
32!
AUTOBIOGRAPHY
33!
LIST OF TABLES
Table 1 The typology of transactional capability (Gamarra & Zawislak, 2013) 12
Table 2 The typology of technological capability (Lall, 1992)
14
Table 3 List of Respondents
17
LIST OF APPENDIXES
Appendixes 1 List Of Interview Questions
32
7
1 INTRODUCTION
The Indonesian government perceives technology issues playing an
important role toward industrial performance. A company would show
positive performance once technology was included into company routine.
For this reason, the government then involves technology in seaweed
business through processed seaweed.
This research aims to identify key factors that would lead the
company to succeed. The research compared two distinctive company
performances. One company represents a success company while the
remainder represents a poor-performer in producing Alkali-treated
carrageenan (ATC). All samples taken are government-owned and are
grantee for machinery grant program. Such circumstance has enabled the
company to have same machinery as well as the same training materials.
Given same level of technology, there are nonetheless noticeable differences
in terms of company performances.
There is still an underperforming company despite being supplied
with same technology and training material. It automatically ignores a
technology role as the only one distinctive element in a success company.
Instead, the evidence indicated another element as determinative factors.
Background
Price fluctuation is problematic in a seaweed industry. It has been
occurring over years and thus gives seaweed farmers great losses. It has
been disadvantages seaweed farmers as it keep fluctuating in seaweed
growing season, particularly during 30 to 45 days growing period. As a
result, it has eventually give major impact to the farmer’s income, and
regional economic growth in general.
Mutual collaboration then formed between local government and
central government in order to support industrialization through AlkaliTreated Carrageenan (ATC) production. ATC is famed as the simplest form
of processed seaweed. It has four times higher in term of selling prices
compared to raw seaweed. In addition to value added content, ATC is also
less susceptible towards price fluctuation than raw seaweed and thus would
benefit seaweed farmers. Therefore, the government provided assistance by
giving ATC machinery as well as capacity building to local region.
The machinery program has been lasting for years. Providing a full set
of ATC machinery, such as washer, boiler and chopping machine. To some
extent, the program mostly conducted in a great seaweed producer region
due to stable supply of raw material.
By establishing a local company, the Indonesian government believes
that not only does the program play central role in price stabilization, but
also does affect regional economic growth through local empowerment. A
local industry establishment will eventually benefit the region by creating
8
new jobs as well as promoting new business. The technology nevertheless
has shown different results in term of company performance amongst grant
recipients.
Problem Statement
The machinery grant program has shown low impact towards
company performance. Despite having same specification of machinery, the
company varied in term of company productivity.
The presence of technology has shown low success rate amongst
recipients. It automatically rejects government hypothesis regarding
technology’s great contribution toward a success company. It indicates
instead the role of another distinctive capability in a company. Therefore,
there is a need to identify another important capabilities in the company.
The findings of the research will be useful to modify current program
operationalization as well as strengthening all related regulation.
There are actually several studies regarding company internal
capabilities, such as technological capabilities (Lall, 1992), innovation
capability (Janaratne, 2014; Zawislak, Cherubini Alves, Tello-Gamarra,
Barbieux, & Reichert, 2012) and transactional capability (Gamarra &
Zawislak, 2013). These notions accordingly are useful framework to
approach the problems in machinery grant program.
Research Objectives
The purpose of this research is to identify key factors that lead to the
successfulness of companies receiving technology grant. The study aims to
contribute in policy-making on managing technology grant in Indonesia.
Significance to the field
In connection with the research, the definition of innovation capability
has been disputed with many scholars. This research views innovation
capability as a driver that is able to influence a company to innovate
(Zawislak et al., 2012). Saunila and Ukko (2012) confirm that there is
significance between innovation capability and firm performance.
Given such evidences, this research perceives that there are two
essential elements of innovation capability, namely technological and
transactional capability. Technological capability is an extract of knowledge
internalization. It enables the company to produce either new product or
process by possessing the ability to use technology, such as skills, methods
and techniques. Amongst all internal capabilities, technological capability
has been frequently discussed due to its central role in business initiation
(Zawislak et al., 2012). Nevertheless, Gamarra and Zawislak (2013) claimed
that technological capabilities needs another aspect as a complementary as it
is not able to overcome stagnancy in term of company performance.
9
This research confirms the importance of transaction capability
elements in the company. It views transactional capability as a technological
perfect match in a company. The company needs both capabilities in order
to keep innovating. In the real world, the innovation is the ultimate weapon
to outperform the competitors (Janaratne, 2014). The transaction capability
benefit the company through reducing transactional cost and thus is
regarded as a innovation. Many scholars studied its definition and the
benefit. However, there are still few empirical studies as to transactional
contribution to the company.
Current literature have studied innovation capability in private-owned
Small Medium Enterprise (SME), ranging from the assessment of
innovation capability in Finnish SME (Saunila & Ukko, 2014), until
improving innovation capability in Australian SME (Janaratne 2014).
However, there is still limited study conducted in state-owned SME, which
may differs in term of capital structure, SME’s definition as well as the
company mission.
In term of capital structure, the private company mostly source from
bank loan for its capital. Meanwhile, the Indonesian state-owned company
uses annual government budget. Therefore, the state-owned company has
never been affected by interest rate.
With respect to SME’s definition, there is a substantial difference
among countries. Saunila and Ukko (2012), for instances, uses SME
definition based on EU Recommendation (2003/362). It basically varies in
term of amount of employees and revenue compared to Indonesian SMEs.
At last, Indonesian state-owned SMEs is also designed for certain
objectives, ranging from promoting industrialization in remote area until
commodity price stabilization. As a result, these factors may distinguish
from SME in current literature review. Hence, it is important to examine
both technological and transactional capability in Indonesian state-owned
company, including in ATC Industry.
Limitation
This research is conducted in a government pilot-project. It employs
two companies as research samples, which differ in term of its time
establishment. It therefore may interfere both company performances.
The limited number of respondents occurred due to technical
constraint. Being a pilot project, the program has shown low success rate.
Accordingly, there is only limited company that is representative for a
success company.
In addition, this research specifically took place in ATC Industries.
Having this in mind, this research may have limitation as a framework for
other research in different commodity.
In term of finding, this research intends to identify the presence of
both technological and transactional capability within an ATC company and
thus has a limitation when it comes to measuring the level of, either
technological; or transactional in a company.
10
2 LITERATURE REVIEW
Introduction
Nowadays, innovation is perceived as the solution to sustain the
business since restructuring or lowering cost is no longer able to stand the
pace of today’s competition. Therefore, it is important for a company to
develop their innovation capability so as to be competitive (Janaratne, 2014).
However, there is still no fixed definition regarding innovation
capability. In addition, innovation capability has been recognized as an
intangible asset. It is therefore difficult to measure and thus makes the
researcher need to find specific tools to approach it (Janaratne, 2014).
Nevertheless, innovation capability is able to explain current firm
performance (Saunila & Ukko, 2012). For instances, Janaratne (2014)
studied the firm performance measurement by using innovation capability as
a tool for improving Australian Small Medium Enterprises (SME)
performances. Having this in mind, it is important to demonstrate good
knowledge of innovation capability prior to the company examination.
According to Saunila and Ukko (2012), they have specified innovation
capability through defining its closely related aspects. It is therefore
important to comprehend firm internal capabilities, which mainly constitute
the innovation capability framework.
Definition of company’s internal capabilities
Studies on capabilities have been conducted by many researchers,
such as core competence (Prahalad & Hamel, 1990), transactional
capabilities, innovative capabilities (Zawislak et al., 2012) and technological
capabilities (Patel & Pavitt, 1997). A capability is one of determinant factors
that company use to create differentiated products and services.
According to Zawislak et al. (2012), It is a four set of internal
capabilities, namely technological; operational; management; and
transactional capabilities. Amongst capabilities, technological capability has
emerged as the most popular concept to determine a level of company
innovativeness (Patel and Pavitt, 1997) although not all technology
companies become an innovative company. The remainders are then
grouped and labeled as complementary capabilities.
Transactional capability, however, has been studied as a technological
capability perfect match. According to Gamarra and Zawislak (2013), a
collaboration between technological and transactional capability has
resulted superior firm performance. It confirms that technology is not
sufficient so that a company requires complementary capabilities, such as
transactional capabilities.
Innovation capability
There have never been fixed definition when it comes to innovation
capability definition. For instances, Innovation capability is factors that
11
produce innovative outputs (Janaratne, 2014; Neely, Filippini, Forza, Vinelli,
& Hii, 2001). Saunila and Ukko (2012) confirm that innovation capability
referring to all elements that influence an organization’s capability to
manage its innovation. As a result, innovation capability is a concept
coming from internal knowledge conversion, which is commonly extracted
from daily routine operation.
Alternatively, Branzei and Vertinsky (2006) emphasizes that
innovation capability is the company’s ability to transform external
knowledge into a new product. It, however, also covers the ability to
commercialize the product. It rather focuses on external than internal
knowledge transformation. The external knowledge means useful
information coming from outside the company.
Meanwhile, Zawislak et al. (2012) find that innovation capability
primarily consists of four elements of organization’s capabilities that
working together in order to promoting innovation and thus would improve
the company competitiveness. These four sets of capabilities are namely
technological capability, transactional capability, operational capability and
management capability.
Gamarra and Zawislak (2013) only focus on two out of four set
essential capabilities in the company, such as technological and
transactional capability. The author perceives that innovation capability is
the ability both in translating the company knowledge and marketing the
innovation result.
On one hand, the company is able to crystallize its learning process
into mature technology development. On the other hand, the company is
also able to market the product. According to Zawislak et al. (2012),
Innovation capability is achieved when a company has equally
accomplished both task. The scholar then claims both capabilities are
essential due to its ability to achieve innovation goals
The concept basically confirms innovation capability model
introduced by Zawislak et al. (2012). Innovation capabilities comprises
Technology Capabilities (Lall, 1992), Operational Capabilities;
Management Capabilities; and Transactional Capabilities (Zawislak et al.,
2012).
However, it is still possible to distill the concept into a compact
concept. Operational capabilities, for instance, is solely represented by
technology capability. Both elements indicate a company’s good proficiency
in transforming company’s internal knowledge, such as product formula,
chemical mix, etc.
Meanwhile, the transactional capability is represented by management
capability. Both element share similar task in managing a company sources,
such as energy efficiency, marketing cost efficiency, etc. As a conclusion,
both technological and transactional capability should be carefully taken
into account as a main driver in a success company.
12
Table 1 The typology of transactional capability (Gamarra & Zawislak, 2013)
Capability
Level
Basic
Intermedi
ate
Advanced
Transactional capability
Client-centered
Basic customer-centered (BCC)
BCC1. No post sales service
BCC2. Sales are through representatives
BCC3. No contracts with main customers
BCC4. Distribution and logistics are outsourced
BCC5. Consumer needs are perceived but not
formally monitored
BCC6. The marketing/sales department alone is
responsible for dealing with consumer
Intermediate customer-centered (ICC)
ICC.1. Occasional post-sales service
ICC.2. Sales are through representatives and own
outlets
ICC.3. Contracts exist with some main
customers
ICC.4. Distribution and logistics are mixed (inhouse and outsourced)
ICC.5. The needs of the consumers are beginning
to be formally monitored
ICC.6. The marketing and product development
departments alone are responsible for dealing with
the consumers’ needs
Advanced customer-centered (ACC)
ACC.1. Post-sales service has an important role in
the firm
ACC.2. Sales are mainly through own outlets
ACC.3. Contracts exist with most of the main
customers
ACC.4. Distribution and logistics are mainly inhouse
ACC.5. The needs of the consumers are formally
monitored
ACC.6. All the departments (e.g marketing,
production, R&D, managerial, etc) are
integrated in order to meet the needs of the
customers
Supplier-centered
Basic supplier-centered (BSC)
BSC1. The suppliers are frequently changed
BSC2. Communication
(personal,telephone,email,etc) with the
suppliers only occurs in order to place
orders (transaction)
BSC3. When buying from a new supplier, their
reputation is only analysed a few times
BSC4. No contracts with the main suppliers
BSC5. The main technology suppliers (e.g,
machinery and equipment) are local
BSC6. Geographical proximity of a supplier
(national or international) is not an
important factor influencing the choice of
supplier
Intermediate supplier-centered (ISC)
ISC.1. The suppliers are not frequently
changed
ISC.2. Communication (personal,
telephone,email,etc) with the suppliers
generally occurs in order to place orders
(transaction)
ISC.3. Purchases are only made from new
suppliers after extensive analysis
ISC.4. Contracts exist with some suppliers
ISC.5. The main technology suppliers (e.g.
machinery and equipment) are national
ISC.6. Geographical proximity of a supplier
(national or international) is an important,
but not determinant factor influencing the
choice of supplier
Advanced supplier-centered (ASC)
ASC.1. The company has worked with the same
suppliers for years, which are only
changed when necessary
ASC.2. Communication (personal, telephone,
email, etc) with the suppliers occurs
constantly, regardless of purchases
ASC.3. Purchases are only made from new
suppliers (e.g machinery and equipment)
are international;
ASC.4. Geographical proximity of a supplier
(national or international) is a
determinant factor influencing the choice
of supplier
Transaction Capability
Studies on transaction cost led by Coase (1937) becomes a base line
for the emergence of transaction capability. Traditionally, Coase emphasizes
that market mechanism is not free but involves transaction cost. In short, it
refers to time and money to search sellers and buyer. Transaction capability
is defined as a firm’s ability, skill, knowledge or useful experience that firm
use in reducing transaction costs, such as marketing cost, delivery cost, etc.
13
Accordingly, the firm will outperform another firm as they can reduce
the emerging cost from finding suppliers and customers. Similar with
technological capability typology (Lall, 1992), Figure 1 illustrates the firm’s
current level of transactional capability. It consists of two dimensions
(Client-centered and Supplier-centered) and each of which has three groups
of level, namely basic, intermediate and advanced.
Gamarra and Zawislak (2013) research preposition was that each
group represents the level of transaction capability. Advanced level of
transactional capability requires more complex qualifications. This typology
could be useful in indicating current state of firm’s transactional capability
and thus would represent the level of a firm’s performance.
Technological Capability
The Neo-Schumpeterian tradition focused on the technological
capabilities as main determinant factor to achieve Schumpeterian profits. In
addition to technological factor, neo-Schumpeterian also concern on “input”
of resources (e.g technology) analysis instead of “output” of resource
(product) in firms. It then may suggest proper technology firms should
acquire.
Similar research has conducted by Lall (1992), whose studies
examining technology capabilities difference between developed and
developing countries, as well as the way they transfer the technology. Like
transactional capability typology (Gamarra & Zawislak, 2013), the
researchers design a typology of technology capabilities, consisting three
level of complexity (basic, intermediate and advanced). Figure 2 clearly
showed all qualifications that should be met before classified either as basic,
intermediate or advanced technological capability.
Traditionally, technological capability constitutes the most influential
variable of innovation performance of the firms. Nevertheless, the firms
should take into account three another major factors, such as operations,
management and transaction capabilities so as to capture the innovative
performance of the firms (Gamarra & Zawislak, 2013)
This research perceives innovation capability as two essential
elements, namely technological and transactional capability. Based on
literature review, those two elements have become the firm’s essentials
because it meets innovation goals.
Technological capability is perceived as the result of company
knowledge internalization. It enables the company to produce either new
product or process by possessing the ability to use technology, such as skills,
methods and techniques. The position becomes even important due to its
role in business initiation, (Zawislak et al., 2012). Nevertheless, it also
needs another capabilities in order to overcome a company’s failure in
improving its performances (Gamarra & Zawislak, 2013)
Hence, the researcher confirms that transaction capability is a
determinative factor. The company should posses both transaction capability
and technological capability. Both capabilities are useful in encouraging the
company to innovate.
14
Table 2 The typology of technological capability (Lall, 1992)
Degree of
Complexity
BASIC
Simp
le,
Routi
ne
INTER
MEDIA
TE
Adap
tive
dupli
cativ
e
(Sear
ch
base
d)
ADVAN
CED
Inno
vativ
e
risky
(Res
earch
base
d)
Functional
Product
Engineering
Preinvestment
Project
Execution
Process
Engineering
Prefeasibility
and
feasibility
studies, site
selection,
scheduling
of
investment
Civil.
Construction,
ancillary
services,
equipment
erection,
commissionin
g
Search for
technology
source.
Negotiation
of contracts.
Bargaining
suitable
terms. Info.
systems
Equipment
procurement,
detailed
engineering,
training and
recruitment
of
skilled
personnel
Debugging,
balancing,
quality
control
preventive
maintenance,
assimilation
of
process
technology
Equipment
stretching,
process
adaptation
and
cost
saving,
licensing new
technology
In-house
process
innovation,
basic research
In-house
product
innovation,
basic research
Basic process
design.
Equipment
design
and
supply
Industrial
Engineeri
ng
Linkages within
Economy
Assimilation
of
product
design, minor
adaptation to
market needs
Work flow,
scheduling,
timemotion
studies,
inventory
control
Local procurement
of goods and
services,
information
exchange
with
suppliers
Product
quality
improvement,
licensing and
assimilating
new imported
product
technology
Monitoring
productivit
y,
improved
coordinatio
n
Technology
transfer of local
suppliers,
coordinated
design, S&T links
Turnkey
capability,
cooperative R&D,
licensing
own
technology
to
others
Nowadays, innovation is the ultimate weapon to surpass competitors
(Janaratne, 2014). The transaction capability benefits the company through
reducing transactional cost. Moreover, it helps the company to transact the
product to the market. Transactional capability is then classified as
innovation as it helps the company to be competitive.
Many studies research transactional capability definition and benefit.
Yet, there are few empirical studies with regard to its presence in the
company, particularly in state-owned company. This study, however, aims
to use two dimensions of innovation capability into empirical study. Each
typology as shown both in figure 1 and 2 are useful in determining interview
questions.
The research took place in state-owned ATC Industry located in
Indonesia. Current literature have studied innovation capability in privateowned Small Medium Enterprise, ranging from the assessment of
innovation capability in Finnish SME (Saunila & Ukko, 2014), to improving
innovation capability in Australian SME (Janaratne, 2014). A state-owned
company may differ in term of capital structure, SME’s definition as well as
the company objectives.
15
With respect to capital structure, the state-owned company has been
fully funded under a government budget whereas private company funds its
company from bank loan. Therefore, it showed significant difference, as the
state-owned company has never been affected by loan interest rate.
With respect to SME’s definition, there is substantial difference
among countries. For instances, Saunila and Ukko (2012) defined SME
based on EU Recommendation (2003/362) that shows different specification
with the other SME in some developing countries , Indonesia in particular.
Total employees, total revenue would differentiate the company definition
to the others and thus need further adjustment.
Lastly, Indonesian state-owned SME are also designed for special
purpose, ranging from promoting industrialization in remote area until
commodity price stabilization. As a result, these factors may distinguish
from SME in current literature review.
16
3 RESEARCH METHOD
Introduction
In this research, the author deliberately views that innovation
capability becoming integral factors of company success story. It is
inseparable and mainly consisted of four company’s internal capabilities,
such as technological capabilities, management capabilities, operational
capabilities and transactional capabilities. The research is conducted through
in-depth interview with two CEOs coming from two different company
backgrounds. One company has successfully operated its business;
meanwhile the other showed the otherwise. Sample selection is purposive
sampling. It is because the research coverage is only in all state-owned ATC
industry, which is still regarded as government pilot project.
With respect to the research objectives, the author has been prepared
three main research questions, which is then altered as interview field
questions. There are three questions as follow:
1. What kind of capabilities distinguishes one firm from another in the
performance of seaweed industry?
2. How much difference does technology make to firm performance?
3. How much difference does transactional capability make to firm
performance?
Setting
The research took place in two different state-owned ATC companies.
All companies are under machinery grant program and therefore are entitled
for same machine specification as well as receiving same training materials.
Company B is located in Eastern Lombok, West Nusa tenggara and
Company A is in Waingapu, East Nusa Tenggara.
Participants
The sampling procedure used by the author is purposive sampling. All
companies selected based on certain criteria, such as they have ATC as its
main product, state-owned company, entitled to the machinery grant
program. Moreover, the selection is also based on company background.
The company A, which is located in Waingapu, is a leading state-owned
company in ATC business. Meanwhile, Company B is less-performing
company compared to company A despite having same machinery. The
details of the participants in this study are shown in Table 1.
17
Table 3 List of Respondents
Respondent
Institution
Position
ST (initial)
Company A (Company)
YA ( initial)
Company B (Technical Manager
Unit)
Seaweed Expert
Expert
Government officer
Government
HA (initial)
FA (Initial)
Manager
Respondent
code
Manager of
Company A
Manager of
Company B
Research Procedure
All participants in the study are the company manager. They are
selected because its vital role in operating the company. The interviews are
conducted to get their perspective regarding company’s internal capabilities
as well as ATC business. The author and interviewee have set certain date
and time for interview. Interview took place in company site and local
government building. Each interview has been tape-recorded for accuracy
and lasted for 1 hour. The identification has three stages as follows:
1. Identification of companies profile and the progress of machinery
programs.
The research collected data regarding company’ general information
such as number of employees, the production capacity, the organization,
the company eligibility of the program, the progress of machinery grant
program.
The data collection employed semi-structure interview and field
observation. There were two companies interviewed in this research,
namely company A and company B. The details of respondents can be
seen in Table 1. Moreover, the list of questions during interview session
is in Appendix 1.
2. Identification of internal capabilities of companies
This stage is to identify the current internal capabilities (transactional
and technological capability) in two companies. The research covers
both processing technology being used by companies and transactional
capability.
Data collection method employed semi-structured interview and field
observation in companies, respectively. The research interviewed
manager of company who plays central role in company as to
technological and managerial issues in company.
In this session, the researcher probed respondents as to technological
introduction in each company. The data covered technology that suits
company needs, the obstacles of operating new technology, modification
of the machinery, and current research and development. Moreover, the
data also covered human resources management, sales and company
management.
18
To confirm the findings gathered from interview session and field
observations, the research interviewed a seaweed expert and government
officer. Both respondents are having good knowledge of ATC business
as well as machinery grant program in Indonesia.
Data Analysis
First, All collected data from interview were transcribed and
organized based on research questions and general themes. Second, the
researcher used coding method in order to organize the data into a limited
number of specific themes. The researcher codified the data by narrowing
the data into limited issues that match the research questions. Third, the
researcher use specific themes as dot point when comparing two companies
so as to answer the research questions.
19
4 FINDING AND DISCUSSION
This chapter will describe interview results. This research successfully
gathered information form two respondents, comprising of two managers
from the local companies. All interview results have been transcribed and
coded prior grouping it for a major theme.
All interview questions have successfully drawn major themes that are
determinative for a successful company, such as human resources or
personnel expertise in particular. All findings will be thoroughly discussed
based on its relevancy to research questions.
Performance Capability of Seaweed Industry
The research question 1 asked what capabilities that distinguish one
company to another. The data revealed there are majorly five issues, which
successfully distinct two companies, such as form of organization, the level
of government assistance; potential buyer; and raw material supplier. The
following discussion will cover all of such factors in respective company.
The discussion firstly started in accordance to the company A experience,
representing a successful company. The company B then followed by
showing opposites facts despite sharing similarities in particular issues.
First, both companies have differed in term of organization form. The
company A has been firstly projected as a full state-owned company, which
consists of shareholders, CEO, and employees. Meanwhile, the company B
has smaller form of company than company A. Adding to that; the company
is hierarchically under government body, which is not a full part of business
entity. The government claimed that the company would compete for the
market once it shows robust productivity.
As a functional company, The CEO of company A holds frequent
meeting with shareholders, including house of representative, to report a
factory progress. They discussed intensively as to problem encountered in
the factory, such as cash capital and general problems. The meeting covers
both technical issues as well as corresponding policy in the company
business, such as raw material availability. Given such discrepancies, it is
then possible for both companies having different level of support from each
government.
The company A, for instances, has strong support from local
government in securing its business. The local government supports by
issuing protective policy for raw material while the company B has endured
unsupportive force from local regulation.
Practically, the local government has been supporting company A
with powerful regulation. The government has imposed a retention policy,
20
which has impacted raw material supply. The policy has forced all raw
material suppliers taking factory into account as a potential buyer.
Theoretically, it advises certain amount of raw material, which all suppliers
should have fulfilled prior selling it outside Waingapu. Having done this
method, the company A has never found difficulties to meet the company A
demand of raw material.
Third, both companies have differed in term of buyers. As a leading
company in process seaweed, the company A has good sales network. They
have successfully sold the product to several companies, such as PT. Galic
Artha Bahari; PT. Phoenix Mas; PT. Giwang Citra Laut; PT. Gumindo; PT.
Giwang and PT. Indo Seaweed. All buyers, typically come from a big
company, are selling an advanced product of carrageenan.
The data then revealed that the company A has better sales pitch than
company B. it works by way of using manager’s previous connection to
reach the potential buyer. Mutual trust and product’s quality has
successfully tied a long-term business partnership between the company and
buyers. The evidence indicates that manager role is still irreplaceable. The
role is even obviously seen when exploring a company potential.
Residing in a fully remote area, the company A has been successfully
surviving for six years. The company, nevertheless, has built its business
realm from scratch and was begun with limited number of employees. A
leader’s prowess in maximizing company potential is very bold in such
circumstance. In this case, the company A has officially benefited from
manager’s expertise. Through her expertise, she could manage any
limitation human resources in the area.
Influence of Technological Capability on Firm Performance
Research question 2 asked how much difference technology makes to
firm performance. The data revealed that both company have basically had
benefit due to technology intervention. In this case, the benefits are ranging
from a stable price, scheduled sales and job creation. In term of price, a
technological intervention has successfully transform raw material into
process ATC.
Technological capability concept emerges due to the gap, which
usually present in learning progress, among countries. It, nevertheless,
appears indicative. Furthermore,(Lall, 1998) explains that there are
important determinants of technological capabilities, such as human capital
base and R&D (Research and Development) activity. The human capital
base is then measured through enrolment levels. his thesis, however,
emphasizes the correspondence between education and technology levels of
a country.
The education is not equally represent capability. However, enrolment
level would be useful in determining in which level of technology has taken
21
place. Formal education, besides specific experience, has considerably given
employees access to gain technology know how (Lall, 1998).
The research then uses Lall’s approach, which uses formal education
serving as a proxy to technology capability. It practically seeks enrolment
level in each region so as to compare it thoroughly. Then, the research also
compares R&D activity on each region for differences. The research,
however, not only does compare the differences but it also seeks some
similarities, which reside in both companies.
Based on National Bureau of Statistic, the data revealed that both
companies share similar condition of educational background in its
employment. There is 69,71 precents of total local workforce graduated
from primary school (Wahyudin, 2015). On the other hand, East Nusa
Tenggara has better quality of workforce. The data showed that there is
61,39 precents of total workforce have graduated with the same level (Wea
& Nggili, 2014). Such data has also been supported by another findings,
DAI (2013) found that vast majority of labour force in NTB are unskilled
level. Three main categories has been occupied to describe the current
situation, namely unskilled (elementary or lower, semi-skilled (junior
secondary) and skilled (senior secondary and above).
The research then found problem that occurred to get a good
employment. The company A, for instances, has various underlying reasons
that impede them having better hiring, such as tertiary-graduated employee
(e.g. Bachelor degree or Master degree). First, the research found that a
location of company A has been limiting a prospective people working in
the company. Remote area with lack of accessibility has been one of
constraints.
The second reason is the people’s mindset. The research found that
people’s mindset remains unchanged with respect to their favorite jobs. In
company A’s case, people surrounding has mostly devoted civil servant as
their favorite job. Such orientation has automatically rejected any other
prospective jobs, like ATC business. Having tough impediment, the
company then human resources development between them give different.
The company A, for instances, has successfully sent its best
employees having their scholarship. The company values the role of human
resources towards company. Even though, the scholarship endowment
merely devoted for administration requirement. The national regulation has
set minimum education enrolment for particular position in company.
By contrast, the company B resides near to the city and therefore has
better accessibility than company A. it is nevertheless unable to make the
company B performing. However, the company has found difficulties in
better hiring due to lack of competent people. The enrolment level in NTB
statistically shows poor condition and therefore successfully influences
another dimension, such as R&D activity in the company.
The company B showed lack of R&D activity. As a company, its
management has fully relied on another party when it comes to research and
development. In this case, a competent party comes through machinery
grant package, which is fully provided by government. Hence, this research
22
found that technological capability role is rather functional in adapting a
new technology than to innovate (Lall, 1998).
According to the manager in Waingapu, the machinery technology has
firstly introduced by Chinese companies in 1980’s. It emerges firstly as a
small-scale business, which are eventually adopted by many ATC
companies throughout the country. The technology gained its popularity
quickly and therefore was taken into account by the Indonesian government.
Indonesia has been adopted the technology since 1990’s. The
Indonesian government tried to adopt the technology locally and tested it in
form of small-scale business. Such evidence, however, prove the existence
of technological capability in the Indonesian seaweed industry. It affects the
overall of company performance and therefore is responsible for
performance gap among the companies. Lall (1992) defines that a
competitive company should be able to show its basic core of functions.
Investment, production, and linkage capabilities would serve as a suitable
proxy to explain firm-level technological capabilities (FTC).
Investment capabilities mostly play in planning domain. It refers to
skills of a firm to identify, prepare and procure a suitable technology for the
firm to operate. Subsequently, production capabilities refer to required skills,
which is involved in quality control, maintenance, and operation of a firm.
Specifically, it also includes the adaptation of new technology that company
acquire or equipment stretching (Lall, 1992). Meanwhile, linkage
capabilities are the skills required to convey information, skills and
technology between firm and external parties, such as raw-material supplier,
subcontractor and another institutions. Such factors are then considered as
variables in reviewing two research samples.
In term of investment capabilities, the manager of company A showed
distinctive prowess in determining suitable technology and equipment for
the company. Meanwhile, the manager of company B showed the otherwise.
The manager could not predict and overly put reliance to external party,
which is its consultant, when procuring the machinery.
In term of production capabilities, there is significant difference in
term of technology utilization between two companies. In this case, one
company uses the technology more efficiently than its counterpart despite
having same technology (Lall, 1992). The research then located notable gap
in cost improvement and equipment stretching between companies.
Company A, for instances, is beneficiaries of manager’s past experience in
ATC industry. It then strongly influences manager mindset, which is now
keeping efficiency as company’s top priority. Theoretically, cost
improvement is one of hallmark of technologically mature company, and is
indicating a further step taken after assimilating a new technology (Lall,
1992). In addition to cost improvement, the company also undertook
machinery modification for better productivity. The company successfully
internalized the technology that matches its need.
Therefore, the research found that both companies are deserved a
place in Lall’s typology. Given some advancement shown in company A,
the company has currently reached intermediate level of technological
capabilities. The company has successfully developed its initial plan,
23
successfully upscale the industry, extending the equipment, and has shown
strong communication toward external party. The judgment of company
function is still indicative. Yet, a guidance written by Lall has considerably
helped the measurement. it indicates advanced level of two functions,
particularly in process; and industrial engineering. It is also noteworthy that
the company need at least one function in FTC typology (Lall, 1992). The
company complies to three major elements that construct FTC, namely
investment; production; and linkage capabilities.
Meanwhile, the company B showe
INDONESIAN SEAWEED INDUSTRY: AN EXPLORATORY
RESEARCH
ADITYA ANDIKA WICAKSONO
GRADUATE SCHOOL
BOGOR AGRICULTURAL UNIVERSITY
BOGOR
2015
DECLARATION*
I certify that the thesis entitled “Improving the Capability for Innovation in
the Indonesian Seaweed Industry: an Exploratory Research” is my original work
and has been fully acknowledged by academic advisors. In addition, I certify that
this copy of thesis has been approved for being available in both University of
Adelaide and Bogor Agricultural University.
I give consent to this copy of my thesis when deposited in the Bogor
Agricultural University library, subject to the provisions of the copyright act. The
author acknowledges that copyright of published works contained within this
thesis resides with the copyright holder(s) of those works.
Jakarta, July 2015
Aditya Andika Wicaksono
NIM F351137011
SUMMARY
ADITYA ANDIKA WICAKSONO. Improving the Capability for Innovation in
the Indonesian Seaweed Industry: An Exploratory Research. Supervised by AJI
HERMAWAN and TITI CANDRA SUNARTI.
The Indonesian government perceives technology issue playing an
important role in improving industrial performance. The government then believes
that technological intervention through particular government programs will help
securing a commodity price. A machinery grant, for instances, has been chosen as
a solution to overcome seaweed problem in many Indonesian regions. However,
the program has showed different result in every place.
All companies under the program tend to perform differently despite being
equipped by same technology. It, however, indicates that technology alone is not
necessarily granting a success. Instead, it indicates another distinctive elements
that company should posses in order to succeed
This research aims to identify key factors that would lead the company to be
successful. It is conducted by comparing two distinctive company performances,
which are successful and less successful state-owned carrageenan (ATC) Industry
in Indonesia. All Data collection is conducted through semi-structured interview.
The research took place both in the company A and B. both companies are
geographically separated. The company A represents a success ATC Company,
which is located in East Sumba. Meanwhile, the company B represents
underperforming company, which is located in East Lombok. All samples taken
are officially under government machinery grant program. This research used
preselected framework in order to generalize the findings.
The researcher views that both of technological and transactional capability
have influenced a company to be innovative (Gamarra & Zawislak, 2013).
Gamarra and Zawislak (2013) says technological capability is an ability to use
technology in order to gain advantage over competitor while the transactional
capability aims the same goals by managing a company expenses. Hence, both
factors are taken into account as a research framework.
The research finds that managerial skills plays important factors in a success
company. It becomes a distinctive factor that distinguish the company A to the
company B. Unlike the company B, the company A is chaired by experienced
manager. It allows the manager showing good managerial skills in the company.
Meanwhile, the manager in company B is inexperienced manager. It allows the
manager showing poor managerial skill in the company. The managerial skill has
actually been a distinctive role in two companies.
Keywords: capability, innovation, machinery grant, technological, transactional
RINGKASAN
ADITYA ANDIKA WICAKSONO. Meningkatkan Kemampuan untuk Inovasi
dalam Industri Rumput Laut Indonesia: Sebuah Penelitian Eksploratif. Dibimbing
oleh AJI HERMAWAN dan TITI CANDRA SUNARTI.
Pemerintah Indonesia menganggap teknologi berperan penting dalam
meningkatkan kinerja suatu industri. Oleh karena itu, pemerintah percaya bahwa
intervensi suatu teknologi dapat memperbaiki harga komoditas. Program
pemberian bantuan alat telah didaulat menjadi salah satu kunci untuk
menanggulangi permasalahan tersebut yang terjadi pada industri rumput laut di
beberapa bagian Indonesia. Namun, pada kenyataanya program tersebut
menunjukkan perbedaan tingkat keberhasilan.
Semua perusahaan yang menerima bantuan tersebut cenderung
menampilkan perbedaan kinerja meski memiliki teknologi yang sama. Hal
tersebut mengindikasikan bahwa teknologi tidak mutlak memberikan kesuksesan
yang sama. Sebaliknya, hal tersebut mengindikasikan adanya kontribusi krusial
dari elemen yang lain terhadap kinerja suatu perusahaan.
Penelitian ini bertujuan untuk mengidentifikasi faktor kunci yang
menyebabkan kesuksesan perusahaan yang menerima bantuan teknologi yang
sama. Pengambilan data dilakukan dengan cara membandingkan performa dari
dua perusahaan Alkali-treated Carageenan (ATC) yang memiliki perbedaan
performa.
Data dikumpulkan melalui wawancara semi terstruktur pada perusahaan
sampel di Waingapu dan Lombok timur. Penelitian ini menggunakan suatu
framework untuk menggeneralisir temuan.
Penelitian ini menunjukkan bahwa kemampuan teknologi dan kemampuan
transaksi erat kaitannya dengan tingkat keinovativan suatu perusahaan. Selain
peran teknologi, penelitian ini menemukan bahwa kemampuan manajerial sangat
berperan dalam kesuksesan suatu perusahaan. Kemampuan seorang manajer
perusahaan sangat berperan dalam memajukan industri yang dipimpinnya.
Pengalaman manajerial yang dimiliki seorang manajer merupakan keuntungan
yang dimiliki oleh perusahaan A dan tidak dimiliki oleh perusahaan B.
Keywords: capability, innovation, machinery grant, technological, transactional
Copyright ©2015, by Bogor Agricultural University
All Right Reserved
1. No part of all of this thesis excerpted without inclusion or mentioning the
sources
a. Excerption only for research and education use, writing for
scientific papers, reporting, critical writing or reviewing of a
problem
b. Excerption does not inflict a financial loss in the proper interest of
Bogor Agricultural University
2. No part of all of this thesis may be transmitted and reproduced in any form
without a written permission from Bogor Agricultural University
IMPROVING THE CAPABILITY FOR INNOVATION IN THE
INDONESIAN SEAWEED INDUSTRY: AN EXPLORATORY
RESEARCH
ADITYA ANDIKA WICAKSONO
Thesis
Submitted to the Graduate School in partial fulfillment of
Master of Science Degree in
Agro-industrial Technology
GRADUATE SCHOOL
BOGOR AGRICULTURAL UNIVERSITY
BOGOR
2015
External Examiner:
Prof. Dr. Marimin, MS
PREFACE
Firstly, I would like to thank Allah SWT for the guidance, which assists me
in accomplishing this research. The paper, however, is deliberately written in
accordance to double degree program between Institut Pertanian Bogor in
Indonesia and University of Adelaide in Australia. Given the reason, it is then
inevitable that there are two exact copies of thesis submitted to each institution.
The author would also like to thank Dr. Aji Hermawan, Dr. Titi Candra, and
Dr. Ron Grill, respectively. Their presence has made writing process easier
through valuable feedback and expertise. Then, it helps the author to finish the
project effortlessly.
At last, the author would abundantly thank family for relentless supports
and patience to get through the time with effortless grace. It is definitely an honor
completing this research. Hopefully, academic society would be a beneficiary of
this research.
Jakarta, July 2015
Aditya Andika Wicaksono
TABLE OF CONTENTS
LIST OF TABLES
vi!
LIST OF APPENDIXES
vi!
1! INTRODUCTION
Background
Problem Statement
Research Objectives
Significance to the field
Limitation
7!
7!
8!
8!
8!
9!
2! LITERATURE REVIEW
Introduction
Definition of company’s internal capabilities
Innovation capability
Transaction Capability
Technological Capability
10!
10!
10!
10!
12!
13!
3! RESEARCH METHOD
Introduction
Setting
Participants
Research Procedure
Data Analysis
16!
16!
16!
16!
17!
18!
4! FINDING AND DISCUSSION
Performance Capability of Seaweed Industry
Influence of Technological Capability on Firm Performance
Influence of Transactional Capability on Firm Performance
19!
19!
20!
24!
5! CONCLUSION AND RECOMMENDATION
Conclusion
Recommendation
28!
28!
29!
REFERENCES
30!
APPENDIXES
32!
AUTOBIOGRAPHY
33!
LIST OF TABLES
Table 1 The typology of transactional capability (Gamarra & Zawislak, 2013) 12
Table 2 The typology of technological capability (Lall, 1992)
14
Table 3 List of Respondents
17
LIST OF APPENDIXES
Appendixes 1 List Of Interview Questions
32
7
1 INTRODUCTION
The Indonesian government perceives technology issues playing an
important role toward industrial performance. A company would show
positive performance once technology was included into company routine.
For this reason, the government then involves technology in seaweed
business through processed seaweed.
This research aims to identify key factors that would lead the
company to succeed. The research compared two distinctive company
performances. One company represents a success company while the
remainder represents a poor-performer in producing Alkali-treated
carrageenan (ATC). All samples taken are government-owned and are
grantee for machinery grant program. Such circumstance has enabled the
company to have same machinery as well as the same training materials.
Given same level of technology, there are nonetheless noticeable differences
in terms of company performances.
There is still an underperforming company despite being supplied
with same technology and training material. It automatically ignores a
technology role as the only one distinctive element in a success company.
Instead, the evidence indicated another element as determinative factors.
Background
Price fluctuation is problematic in a seaweed industry. It has been
occurring over years and thus gives seaweed farmers great losses. It has
been disadvantages seaweed farmers as it keep fluctuating in seaweed
growing season, particularly during 30 to 45 days growing period. As a
result, it has eventually give major impact to the farmer’s income, and
regional economic growth in general.
Mutual collaboration then formed between local government and
central government in order to support industrialization through AlkaliTreated Carrageenan (ATC) production. ATC is famed as the simplest form
of processed seaweed. It has four times higher in term of selling prices
compared to raw seaweed. In addition to value added content, ATC is also
less susceptible towards price fluctuation than raw seaweed and thus would
benefit seaweed farmers. Therefore, the government provided assistance by
giving ATC machinery as well as capacity building to local region.
The machinery program has been lasting for years. Providing a full set
of ATC machinery, such as washer, boiler and chopping machine. To some
extent, the program mostly conducted in a great seaweed producer region
due to stable supply of raw material.
By establishing a local company, the Indonesian government believes
that not only does the program play central role in price stabilization, but
also does affect regional economic growth through local empowerment. A
local industry establishment will eventually benefit the region by creating
8
new jobs as well as promoting new business. The technology nevertheless
has shown different results in term of company performance amongst grant
recipients.
Problem Statement
The machinery grant program has shown low impact towards
company performance. Despite having same specification of machinery, the
company varied in term of company productivity.
The presence of technology has shown low success rate amongst
recipients. It automatically rejects government hypothesis regarding
technology’s great contribution toward a success company. It indicates
instead the role of another distinctive capability in a company. Therefore,
there is a need to identify another important capabilities in the company.
The findings of the research will be useful to modify current program
operationalization as well as strengthening all related regulation.
There are actually several studies regarding company internal
capabilities, such as technological capabilities (Lall, 1992), innovation
capability (Janaratne, 2014; Zawislak, Cherubini Alves, Tello-Gamarra,
Barbieux, & Reichert, 2012) and transactional capability (Gamarra &
Zawislak, 2013). These notions accordingly are useful framework to
approach the problems in machinery grant program.
Research Objectives
The purpose of this research is to identify key factors that lead to the
successfulness of companies receiving technology grant. The study aims to
contribute in policy-making on managing technology grant in Indonesia.
Significance to the field
In connection with the research, the definition of innovation capability
has been disputed with many scholars. This research views innovation
capability as a driver that is able to influence a company to innovate
(Zawislak et al., 2012). Saunila and Ukko (2012) confirm that there is
significance between innovation capability and firm performance.
Given such evidences, this research perceives that there are two
essential elements of innovation capability, namely technological and
transactional capability. Technological capability is an extract of knowledge
internalization. It enables the company to produce either new product or
process by possessing the ability to use technology, such as skills, methods
and techniques. Amongst all internal capabilities, technological capability
has been frequently discussed due to its central role in business initiation
(Zawislak et al., 2012). Nevertheless, Gamarra and Zawislak (2013) claimed
that technological capabilities needs another aspect as a complementary as it
is not able to overcome stagnancy in term of company performance.
9
This research confirms the importance of transaction capability
elements in the company. It views transactional capability as a technological
perfect match in a company. The company needs both capabilities in order
to keep innovating. In the real world, the innovation is the ultimate weapon
to outperform the competitors (Janaratne, 2014). The transaction capability
benefit the company through reducing transactional cost and thus is
regarded as a innovation. Many scholars studied its definition and the
benefit. However, there are still few empirical studies as to transactional
contribution to the company.
Current literature have studied innovation capability in private-owned
Small Medium Enterprise (SME), ranging from the assessment of
innovation capability in Finnish SME (Saunila & Ukko, 2014), until
improving innovation capability in Australian SME (Janaratne 2014).
However, there is still limited study conducted in state-owned SME, which
may differs in term of capital structure, SME’s definition as well as the
company mission.
In term of capital structure, the private company mostly source from
bank loan for its capital. Meanwhile, the Indonesian state-owned company
uses annual government budget. Therefore, the state-owned company has
never been affected by interest rate.
With respect to SME’s definition, there is a substantial difference
among countries. Saunila and Ukko (2012), for instances, uses SME
definition based on EU Recommendation (2003/362). It basically varies in
term of amount of employees and revenue compared to Indonesian SMEs.
At last, Indonesian state-owned SMEs is also designed for certain
objectives, ranging from promoting industrialization in remote area until
commodity price stabilization. As a result, these factors may distinguish
from SME in current literature review. Hence, it is important to examine
both technological and transactional capability in Indonesian state-owned
company, including in ATC Industry.
Limitation
This research is conducted in a government pilot-project. It employs
two companies as research samples, which differ in term of its time
establishment. It therefore may interfere both company performances.
The limited number of respondents occurred due to technical
constraint. Being a pilot project, the program has shown low success rate.
Accordingly, there is only limited company that is representative for a
success company.
In addition, this research specifically took place in ATC Industries.
Having this in mind, this research may have limitation as a framework for
other research in different commodity.
In term of finding, this research intends to identify the presence of
both technological and transactional capability within an ATC company and
thus has a limitation when it comes to measuring the level of, either
technological; or transactional in a company.
10
2 LITERATURE REVIEW
Introduction
Nowadays, innovation is perceived as the solution to sustain the
business since restructuring or lowering cost is no longer able to stand the
pace of today’s competition. Therefore, it is important for a company to
develop their innovation capability so as to be competitive (Janaratne, 2014).
However, there is still no fixed definition regarding innovation
capability. In addition, innovation capability has been recognized as an
intangible asset. It is therefore difficult to measure and thus makes the
researcher need to find specific tools to approach it (Janaratne, 2014).
Nevertheless, innovation capability is able to explain current firm
performance (Saunila & Ukko, 2012). For instances, Janaratne (2014)
studied the firm performance measurement by using innovation capability as
a tool for improving Australian Small Medium Enterprises (SME)
performances. Having this in mind, it is important to demonstrate good
knowledge of innovation capability prior to the company examination.
According to Saunila and Ukko (2012), they have specified innovation
capability through defining its closely related aspects. It is therefore
important to comprehend firm internal capabilities, which mainly constitute
the innovation capability framework.
Definition of company’s internal capabilities
Studies on capabilities have been conducted by many researchers,
such as core competence (Prahalad & Hamel, 1990), transactional
capabilities, innovative capabilities (Zawislak et al., 2012) and technological
capabilities (Patel & Pavitt, 1997). A capability is one of determinant factors
that company use to create differentiated products and services.
According to Zawislak et al. (2012), It is a four set of internal
capabilities, namely technological; operational; management; and
transactional capabilities. Amongst capabilities, technological capability has
emerged as the most popular concept to determine a level of company
innovativeness (Patel and Pavitt, 1997) although not all technology
companies become an innovative company. The remainders are then
grouped and labeled as complementary capabilities.
Transactional capability, however, has been studied as a technological
capability perfect match. According to Gamarra and Zawislak (2013), a
collaboration between technological and transactional capability has
resulted superior firm performance. It confirms that technology is not
sufficient so that a company requires complementary capabilities, such as
transactional capabilities.
Innovation capability
There have never been fixed definition when it comes to innovation
capability definition. For instances, Innovation capability is factors that
11
produce innovative outputs (Janaratne, 2014; Neely, Filippini, Forza, Vinelli,
& Hii, 2001). Saunila and Ukko (2012) confirm that innovation capability
referring to all elements that influence an organization’s capability to
manage its innovation. As a result, innovation capability is a concept
coming from internal knowledge conversion, which is commonly extracted
from daily routine operation.
Alternatively, Branzei and Vertinsky (2006) emphasizes that
innovation capability is the company’s ability to transform external
knowledge into a new product. It, however, also covers the ability to
commercialize the product. It rather focuses on external than internal
knowledge transformation. The external knowledge means useful
information coming from outside the company.
Meanwhile, Zawislak et al. (2012) find that innovation capability
primarily consists of four elements of organization’s capabilities that
working together in order to promoting innovation and thus would improve
the company competitiveness. These four sets of capabilities are namely
technological capability, transactional capability, operational capability and
management capability.
Gamarra and Zawislak (2013) only focus on two out of four set
essential capabilities in the company, such as technological and
transactional capability. The author perceives that innovation capability is
the ability both in translating the company knowledge and marketing the
innovation result.
On one hand, the company is able to crystallize its learning process
into mature technology development. On the other hand, the company is
also able to market the product. According to Zawislak et al. (2012),
Innovation capability is achieved when a company has equally
accomplished both task. The scholar then claims both capabilities are
essential due to its ability to achieve innovation goals
The concept basically confirms innovation capability model
introduced by Zawislak et al. (2012). Innovation capabilities comprises
Technology Capabilities (Lall, 1992), Operational Capabilities;
Management Capabilities; and Transactional Capabilities (Zawislak et al.,
2012).
However, it is still possible to distill the concept into a compact
concept. Operational capabilities, for instance, is solely represented by
technology capability. Both elements indicate a company’s good proficiency
in transforming company’s internal knowledge, such as product formula,
chemical mix, etc.
Meanwhile, the transactional capability is represented by management
capability. Both element share similar task in managing a company sources,
such as energy efficiency, marketing cost efficiency, etc. As a conclusion,
both technological and transactional capability should be carefully taken
into account as a main driver in a success company.
12
Table 1 The typology of transactional capability (Gamarra & Zawislak, 2013)
Capability
Level
Basic
Intermedi
ate
Advanced
Transactional capability
Client-centered
Basic customer-centered (BCC)
BCC1. No post sales service
BCC2. Sales are through representatives
BCC3. No contracts with main customers
BCC4. Distribution and logistics are outsourced
BCC5. Consumer needs are perceived but not
formally monitored
BCC6. The marketing/sales department alone is
responsible for dealing with consumer
Intermediate customer-centered (ICC)
ICC.1. Occasional post-sales service
ICC.2. Sales are through representatives and own
outlets
ICC.3. Contracts exist with some main
customers
ICC.4. Distribution and logistics are mixed (inhouse and outsourced)
ICC.5. The needs of the consumers are beginning
to be formally monitored
ICC.6. The marketing and product development
departments alone are responsible for dealing with
the consumers’ needs
Advanced customer-centered (ACC)
ACC.1. Post-sales service has an important role in
the firm
ACC.2. Sales are mainly through own outlets
ACC.3. Contracts exist with most of the main
customers
ACC.4. Distribution and logistics are mainly inhouse
ACC.5. The needs of the consumers are formally
monitored
ACC.6. All the departments (e.g marketing,
production, R&D, managerial, etc) are
integrated in order to meet the needs of the
customers
Supplier-centered
Basic supplier-centered (BSC)
BSC1. The suppliers are frequently changed
BSC2. Communication
(personal,telephone,email,etc) with the
suppliers only occurs in order to place
orders (transaction)
BSC3. When buying from a new supplier, their
reputation is only analysed a few times
BSC4. No contracts with the main suppliers
BSC5. The main technology suppliers (e.g,
machinery and equipment) are local
BSC6. Geographical proximity of a supplier
(national or international) is not an
important factor influencing the choice of
supplier
Intermediate supplier-centered (ISC)
ISC.1. The suppliers are not frequently
changed
ISC.2. Communication (personal,
telephone,email,etc) with the suppliers
generally occurs in order to place orders
(transaction)
ISC.3. Purchases are only made from new
suppliers after extensive analysis
ISC.4. Contracts exist with some suppliers
ISC.5. The main technology suppliers (e.g.
machinery and equipment) are national
ISC.6. Geographical proximity of a supplier
(national or international) is an important,
but not determinant factor influencing the
choice of supplier
Advanced supplier-centered (ASC)
ASC.1. The company has worked with the same
suppliers for years, which are only
changed when necessary
ASC.2. Communication (personal, telephone,
email, etc) with the suppliers occurs
constantly, regardless of purchases
ASC.3. Purchases are only made from new
suppliers (e.g machinery and equipment)
are international;
ASC.4. Geographical proximity of a supplier
(national or international) is a
determinant factor influencing the choice
of supplier
Transaction Capability
Studies on transaction cost led by Coase (1937) becomes a base line
for the emergence of transaction capability. Traditionally, Coase emphasizes
that market mechanism is not free but involves transaction cost. In short, it
refers to time and money to search sellers and buyer. Transaction capability
is defined as a firm’s ability, skill, knowledge or useful experience that firm
use in reducing transaction costs, such as marketing cost, delivery cost, etc.
13
Accordingly, the firm will outperform another firm as they can reduce
the emerging cost from finding suppliers and customers. Similar with
technological capability typology (Lall, 1992), Figure 1 illustrates the firm’s
current level of transactional capability. It consists of two dimensions
(Client-centered and Supplier-centered) and each of which has three groups
of level, namely basic, intermediate and advanced.
Gamarra and Zawislak (2013) research preposition was that each
group represents the level of transaction capability. Advanced level of
transactional capability requires more complex qualifications. This typology
could be useful in indicating current state of firm’s transactional capability
and thus would represent the level of a firm’s performance.
Technological Capability
The Neo-Schumpeterian tradition focused on the technological
capabilities as main determinant factor to achieve Schumpeterian profits. In
addition to technological factor, neo-Schumpeterian also concern on “input”
of resources (e.g technology) analysis instead of “output” of resource
(product) in firms. It then may suggest proper technology firms should
acquire.
Similar research has conducted by Lall (1992), whose studies
examining technology capabilities difference between developed and
developing countries, as well as the way they transfer the technology. Like
transactional capability typology (Gamarra & Zawislak, 2013), the
researchers design a typology of technology capabilities, consisting three
level of complexity (basic, intermediate and advanced). Figure 2 clearly
showed all qualifications that should be met before classified either as basic,
intermediate or advanced technological capability.
Traditionally, technological capability constitutes the most influential
variable of innovation performance of the firms. Nevertheless, the firms
should take into account three another major factors, such as operations,
management and transaction capabilities so as to capture the innovative
performance of the firms (Gamarra & Zawislak, 2013)
This research perceives innovation capability as two essential
elements, namely technological and transactional capability. Based on
literature review, those two elements have become the firm’s essentials
because it meets innovation goals.
Technological capability is perceived as the result of company
knowledge internalization. It enables the company to produce either new
product or process by possessing the ability to use technology, such as skills,
methods and techniques. The position becomes even important due to its
role in business initiation, (Zawislak et al., 2012). Nevertheless, it also
needs another capabilities in order to overcome a company’s failure in
improving its performances (Gamarra & Zawislak, 2013)
Hence, the researcher confirms that transaction capability is a
determinative factor. The company should posses both transaction capability
and technological capability. Both capabilities are useful in encouraging the
company to innovate.
14
Table 2 The typology of technological capability (Lall, 1992)
Degree of
Complexity
BASIC
Simp
le,
Routi
ne
INTER
MEDIA
TE
Adap
tive
dupli
cativ
e
(Sear
ch
base
d)
ADVAN
CED
Inno
vativ
e
risky
(Res
earch
base
d)
Functional
Product
Engineering
Preinvestment
Project
Execution
Process
Engineering
Prefeasibility
and
feasibility
studies, site
selection,
scheduling
of
investment
Civil.
Construction,
ancillary
services,
equipment
erection,
commissionin
g
Search for
technology
source.
Negotiation
of contracts.
Bargaining
suitable
terms. Info.
systems
Equipment
procurement,
detailed
engineering,
training and
recruitment
of
skilled
personnel
Debugging,
balancing,
quality
control
preventive
maintenance,
assimilation
of
process
technology
Equipment
stretching,
process
adaptation
and
cost
saving,
licensing new
technology
In-house
process
innovation,
basic research
In-house
product
innovation,
basic research
Basic process
design.
Equipment
design
and
supply
Industrial
Engineeri
ng
Linkages within
Economy
Assimilation
of
product
design, minor
adaptation to
market needs
Work flow,
scheduling,
timemotion
studies,
inventory
control
Local procurement
of goods and
services,
information
exchange
with
suppliers
Product
quality
improvement,
licensing and
assimilating
new imported
product
technology
Monitoring
productivit
y,
improved
coordinatio
n
Technology
transfer of local
suppliers,
coordinated
design, S&T links
Turnkey
capability,
cooperative R&D,
licensing
own
technology
to
others
Nowadays, innovation is the ultimate weapon to surpass competitors
(Janaratne, 2014). The transaction capability benefits the company through
reducing transactional cost. Moreover, it helps the company to transact the
product to the market. Transactional capability is then classified as
innovation as it helps the company to be competitive.
Many studies research transactional capability definition and benefit.
Yet, there are few empirical studies with regard to its presence in the
company, particularly in state-owned company. This study, however, aims
to use two dimensions of innovation capability into empirical study. Each
typology as shown both in figure 1 and 2 are useful in determining interview
questions.
The research took place in state-owned ATC Industry located in
Indonesia. Current literature have studied innovation capability in privateowned Small Medium Enterprise, ranging from the assessment of
innovation capability in Finnish SME (Saunila & Ukko, 2014), to improving
innovation capability in Australian SME (Janaratne, 2014). A state-owned
company may differ in term of capital structure, SME’s definition as well as
the company objectives.
15
With respect to capital structure, the state-owned company has been
fully funded under a government budget whereas private company funds its
company from bank loan. Therefore, it showed significant difference, as the
state-owned company has never been affected by loan interest rate.
With respect to SME’s definition, there is substantial difference
among countries. For instances, Saunila and Ukko (2012) defined SME
based on EU Recommendation (2003/362) that shows different specification
with the other SME in some developing countries , Indonesia in particular.
Total employees, total revenue would differentiate the company definition
to the others and thus need further adjustment.
Lastly, Indonesian state-owned SME are also designed for special
purpose, ranging from promoting industrialization in remote area until
commodity price stabilization. As a result, these factors may distinguish
from SME in current literature review.
16
3 RESEARCH METHOD
Introduction
In this research, the author deliberately views that innovation
capability becoming integral factors of company success story. It is
inseparable and mainly consisted of four company’s internal capabilities,
such as technological capabilities, management capabilities, operational
capabilities and transactional capabilities. The research is conducted through
in-depth interview with two CEOs coming from two different company
backgrounds. One company has successfully operated its business;
meanwhile the other showed the otherwise. Sample selection is purposive
sampling. It is because the research coverage is only in all state-owned ATC
industry, which is still regarded as government pilot project.
With respect to the research objectives, the author has been prepared
three main research questions, which is then altered as interview field
questions. There are three questions as follow:
1. What kind of capabilities distinguishes one firm from another in the
performance of seaweed industry?
2. How much difference does technology make to firm performance?
3. How much difference does transactional capability make to firm
performance?
Setting
The research took place in two different state-owned ATC companies.
All companies are under machinery grant program and therefore are entitled
for same machine specification as well as receiving same training materials.
Company B is located in Eastern Lombok, West Nusa tenggara and
Company A is in Waingapu, East Nusa Tenggara.
Participants
The sampling procedure used by the author is purposive sampling. All
companies selected based on certain criteria, such as they have ATC as its
main product, state-owned company, entitled to the machinery grant
program. Moreover, the selection is also based on company background.
The company A, which is located in Waingapu, is a leading state-owned
company in ATC business. Meanwhile, Company B is less-performing
company compared to company A despite having same machinery. The
details of the participants in this study are shown in Table 1.
17
Table 3 List of Respondents
Respondent
Institution
Position
ST (initial)
Company A (Company)
YA ( initial)
Company B (Technical Manager
Unit)
Seaweed Expert
Expert
Government officer
Government
HA (initial)
FA (Initial)
Manager
Respondent
code
Manager of
Company A
Manager of
Company B
Research Procedure
All participants in the study are the company manager. They are
selected because its vital role in operating the company. The interviews are
conducted to get their perspective regarding company’s internal capabilities
as well as ATC business. The author and interviewee have set certain date
and time for interview. Interview took place in company site and local
government building. Each interview has been tape-recorded for accuracy
and lasted for 1 hour. The identification has three stages as follows:
1. Identification of companies profile and the progress of machinery
programs.
The research collected data regarding company’ general information
such as number of employees, the production capacity, the organization,
the company eligibility of the program, the progress of machinery grant
program.
The data collection employed semi-structure interview and field
observation. There were two companies interviewed in this research,
namely company A and company B. The details of respondents can be
seen in Table 1. Moreover, the list of questions during interview session
is in Appendix 1.
2. Identification of internal capabilities of companies
This stage is to identify the current internal capabilities (transactional
and technological capability) in two companies. The research covers
both processing technology being used by companies and transactional
capability.
Data collection method employed semi-structured interview and field
observation in companies, respectively. The research interviewed
manager of company who plays central role in company as to
technological and managerial issues in company.
In this session, the researcher probed respondents as to technological
introduction in each company. The data covered technology that suits
company needs, the obstacles of operating new technology, modification
of the machinery, and current research and development. Moreover, the
data also covered human resources management, sales and company
management.
18
To confirm the findings gathered from interview session and field
observations, the research interviewed a seaweed expert and government
officer. Both respondents are having good knowledge of ATC business
as well as machinery grant program in Indonesia.
Data Analysis
First, All collected data from interview were transcribed and
organized based on research questions and general themes. Second, the
researcher used coding method in order to organize the data into a limited
number of specific themes. The researcher codified the data by narrowing
the data into limited issues that match the research questions. Third, the
researcher use specific themes as dot point when comparing two companies
so as to answer the research questions.
19
4 FINDING AND DISCUSSION
This chapter will describe interview results. This research successfully
gathered information form two respondents, comprising of two managers
from the local companies. All interview results have been transcribed and
coded prior grouping it for a major theme.
All interview questions have successfully drawn major themes that are
determinative for a successful company, such as human resources or
personnel expertise in particular. All findings will be thoroughly discussed
based on its relevancy to research questions.
Performance Capability of Seaweed Industry
The research question 1 asked what capabilities that distinguish one
company to another. The data revealed there are majorly five issues, which
successfully distinct two companies, such as form of organization, the level
of government assistance; potential buyer; and raw material supplier. The
following discussion will cover all of such factors in respective company.
The discussion firstly started in accordance to the company A experience,
representing a successful company. The company B then followed by
showing opposites facts despite sharing similarities in particular issues.
First, both companies have differed in term of organization form. The
company A has been firstly projected as a full state-owned company, which
consists of shareholders, CEO, and employees. Meanwhile, the company B
has smaller form of company than company A. Adding to that; the company
is hierarchically under government body, which is not a full part of business
entity. The government claimed that the company would compete for the
market once it shows robust productivity.
As a functional company, The CEO of company A holds frequent
meeting with shareholders, including house of representative, to report a
factory progress. They discussed intensively as to problem encountered in
the factory, such as cash capital and general problems. The meeting covers
both technical issues as well as corresponding policy in the company
business, such as raw material availability. Given such discrepancies, it is
then possible for both companies having different level of support from each
government.
The company A, for instances, has strong support from local
government in securing its business. The local government supports by
issuing protective policy for raw material while the company B has endured
unsupportive force from local regulation.
Practically, the local government has been supporting company A
with powerful regulation. The government has imposed a retention policy,
20
which has impacted raw material supply. The policy has forced all raw
material suppliers taking factory into account as a potential buyer.
Theoretically, it advises certain amount of raw material, which all suppliers
should have fulfilled prior selling it outside Waingapu. Having done this
method, the company A has never found difficulties to meet the company A
demand of raw material.
Third, both companies have differed in term of buyers. As a leading
company in process seaweed, the company A has good sales network. They
have successfully sold the product to several companies, such as PT. Galic
Artha Bahari; PT. Phoenix Mas; PT. Giwang Citra Laut; PT. Gumindo; PT.
Giwang and PT. Indo Seaweed. All buyers, typically come from a big
company, are selling an advanced product of carrageenan.
The data then revealed that the company A has better sales pitch than
company B. it works by way of using manager’s previous connection to
reach the potential buyer. Mutual trust and product’s quality has
successfully tied a long-term business partnership between the company and
buyers. The evidence indicates that manager role is still irreplaceable. The
role is even obviously seen when exploring a company potential.
Residing in a fully remote area, the company A has been successfully
surviving for six years. The company, nevertheless, has built its business
realm from scratch and was begun with limited number of employees. A
leader’s prowess in maximizing company potential is very bold in such
circumstance. In this case, the company A has officially benefited from
manager’s expertise. Through her expertise, she could manage any
limitation human resources in the area.
Influence of Technological Capability on Firm Performance
Research question 2 asked how much difference technology makes to
firm performance. The data revealed that both company have basically had
benefit due to technology intervention. In this case, the benefits are ranging
from a stable price, scheduled sales and job creation. In term of price, a
technological intervention has successfully transform raw material into
process ATC.
Technological capability concept emerges due to the gap, which
usually present in learning progress, among countries. It, nevertheless,
appears indicative. Furthermore,(Lall, 1998) explains that there are
important determinants of technological capabilities, such as human capital
base and R&D (Research and Development) activity. The human capital
base is then measured through enrolment levels. his thesis, however,
emphasizes the correspondence between education and technology levels of
a country.
The education is not equally represent capability. However, enrolment
level would be useful in determining in which level of technology has taken
21
place. Formal education, besides specific experience, has considerably given
employees access to gain technology know how (Lall, 1998).
The research then uses Lall’s approach, which uses formal education
serving as a proxy to technology capability. It practically seeks enrolment
level in each region so as to compare it thoroughly. Then, the research also
compares R&D activity on each region for differences. The research,
however, not only does compare the differences but it also seeks some
similarities, which reside in both companies.
Based on National Bureau of Statistic, the data revealed that both
companies share similar condition of educational background in its
employment. There is 69,71 precents of total local workforce graduated
from primary school (Wahyudin, 2015). On the other hand, East Nusa
Tenggara has better quality of workforce. The data showed that there is
61,39 precents of total workforce have graduated with the same level (Wea
& Nggili, 2014). Such data has also been supported by another findings,
DAI (2013) found that vast majority of labour force in NTB are unskilled
level. Three main categories has been occupied to describe the current
situation, namely unskilled (elementary or lower, semi-skilled (junior
secondary) and skilled (senior secondary and above).
The research then found problem that occurred to get a good
employment. The company A, for instances, has various underlying reasons
that impede them having better hiring, such as tertiary-graduated employee
(e.g. Bachelor degree or Master degree). First, the research found that a
location of company A has been limiting a prospective people working in
the company. Remote area with lack of accessibility has been one of
constraints.
The second reason is the people’s mindset. The research found that
people’s mindset remains unchanged with respect to their favorite jobs. In
company A’s case, people surrounding has mostly devoted civil servant as
their favorite job. Such orientation has automatically rejected any other
prospective jobs, like ATC business. Having tough impediment, the
company then human resources development between them give different.
The company A, for instances, has successfully sent its best
employees having their scholarship. The company values the role of human
resources towards company. Even though, the scholarship endowment
merely devoted for administration requirement. The national regulation has
set minimum education enrolment for particular position in company.
By contrast, the company B resides near to the city and therefore has
better accessibility than company A. it is nevertheless unable to make the
company B performing. However, the company has found difficulties in
better hiring due to lack of competent people. The enrolment level in NTB
statistically shows poor condition and therefore successfully influences
another dimension, such as R&D activity in the company.
The company B showed lack of R&D activity. As a company, its
management has fully relied on another party when it comes to research and
development. In this case, a competent party comes through machinery
grant package, which is fully provided by government. Hence, this research
22
found that technological capability role is rather functional in adapting a
new technology than to innovate (Lall, 1998).
According to the manager in Waingapu, the machinery technology has
firstly introduced by Chinese companies in 1980’s. It emerges firstly as a
small-scale business, which are eventually adopted by many ATC
companies throughout the country. The technology gained its popularity
quickly and therefore was taken into account by the Indonesian government.
Indonesia has been adopted the technology since 1990’s. The
Indonesian government tried to adopt the technology locally and tested it in
form of small-scale business. Such evidence, however, prove the existence
of technological capability in the Indonesian seaweed industry. It affects the
overall of company performance and therefore is responsible for
performance gap among the companies. Lall (1992) defines that a
competitive company should be able to show its basic core of functions.
Investment, production, and linkage capabilities would serve as a suitable
proxy to explain firm-level technological capabilities (FTC).
Investment capabilities mostly play in planning domain. It refers to
skills of a firm to identify, prepare and procure a suitable technology for the
firm to operate. Subsequently, production capabilities refer to required skills,
which is involved in quality control, maintenance, and operation of a firm.
Specifically, it also includes the adaptation of new technology that company
acquire or equipment stretching (Lall, 1992). Meanwhile, linkage
capabilities are the skills required to convey information, skills and
technology between firm and external parties, such as raw-material supplier,
subcontractor and another institutions. Such factors are then considered as
variables in reviewing two research samples.
In term of investment capabilities, the manager of company A showed
distinctive prowess in determining suitable technology and equipment for
the company. Meanwhile, the manager of company B showed the otherwise.
The manager could not predict and overly put reliance to external party,
which is its consultant, when procuring the machinery.
In term of production capabilities, there is significant difference in
term of technology utilization between two companies. In this case, one
company uses the technology more efficiently than its counterpart despite
having same technology (Lall, 1992). The research then located notable gap
in cost improvement and equipment stretching between companies.
Company A, for instances, is beneficiaries of manager’s past experience in
ATC industry. It then strongly influences manager mindset, which is now
keeping efficiency as company’s top priority. Theoretically, cost
improvement is one of hallmark of technologically mature company, and is
indicating a further step taken after assimilating a new technology (Lall,
1992). In addition to cost improvement, the company also undertook
machinery modification for better productivity. The company successfully
internalized the technology that matches its need.
Therefore, the research found that both companies are deserved a
place in Lall’s typology. Given some advancement shown in company A,
the company has currently reached intermediate level of technological
capabilities. The company has successfully developed its initial plan,
23
successfully upscale the industry, extending the equipment, and has shown
strong communication toward external party. The judgment of company
function is still indicative. Yet, a guidance written by Lall has considerably
helped the measurement. it indicates advanced level of two functions,
particularly in process; and industrial engineering. It is also noteworthy that
the company need at least one function in FTC typology (Lall, 1992). The
company complies to three major elements that construct FTC, namely
investment; production; and linkage capabilities.
Meanwhile, the company B showe