Eksploratori Adaptabilitas Pendekatan Sistem Inovasi: Studi Kasus Dukungan pada Produsen Kopi Olahan Dalam Menghadapi Hambatan Non-Tarif.

EXPLORING THE ADAPTABILITY OF AN INNOVATION
SYSTEM APPROACH: A CASE STUDY IN SUPPORTING
INDONESIAN PROCESSED COFFEE PRODUCER IN
SOLVING NON-TARIFF BARRIERS

ANDAR HERMAWAN

GRADUATE SCHOOL
BOGOR AGRICULTURAL UNIVERSITY
BOGOR
2015

DECLARATION
I hereby declare that the thesis entitled ―Exploring the Adaptability of an
Innovation System Approach: a Case Study in Supporting Indonesian
Processed Coffee Producer in Solving Non-Tariff Barriers‖ is my original
work produced through the guidance of my academic advisors and that to the best
of my knowledge. This thesis also presented for the award of a degree in The
University of Adelaide as a double degree program between Bogor Agricultural
University and The University of Adelaide. All of the incorporated materials
originated from other published or unpublished papers are stated clearly in the text

as well as in the bibliography.
I hereby delegate the copyright of my paper to the Bogor Agricultural
University.
Bogor, July 2015

Andar Hermawan
NRP. F351137031

SUMMARY
ANDAR HERMAWAN. Exploring the Adaptability of an Innovation System
Approach: a Case Study in Supporting Indonesian Processed Coffee Producer in
Solving Non-Tariff Barriers. Supervised by YANDRA ARKEMAN and TITI
CANDRA SUNARTI.
Indonesia is a one of the biggest coffee producers in the world. Based on the
Ministry of Industry of the Republic of Indonesia (MoI) in 2013, Indonesia was
the 3rd largest coffee producer in the world with amounting to the production of
748 thousand tons of coffee. Despite being one of the largest coffee exporters,
Indonesian coffee producers have exported mostly on less processed coffee
products or green bean. Export of processed coffee products was only 20% of the
total coffee export. This situation became a problem since there is a price

difference between less processed products and processed products.
Recent studies have shown that tariff escalation is not the main barrier to
export; rather it is prevalence of non-tariff barriers (NTBs) that limits the ability
of developing countries to increase their agricultural processed exports. NTBs
usually take the form of standards, regulations or other types of rules. Countries
have set these kinds of rules for domestic and imported product. Moreover, there
are difference policies on each country that have resulted in different standards of
NTBs from one country to another. Therefore, there is a need to create a
systematic approach that will guide the pattern of information and knowledge
sharing between business, academics and government.
This study has three main objectives that include the following: (1)
Examining effective are business, academics and government in sharing
information and knowledge to support processed coffee producers in solving nontariff barriers problems.; (2) Identifying obstacles that are limiting information
and knowledge sharing between business, academics and government to support
processed coffee producers in solving non-tariff barriers problems; and (3)
Formulating innovation system approach in guiding information and knowledge
sharing between business, academics and government to support processed coffee
producers in addressing non-tariff barriers problems.
This study found that information and knowledge sharing between business,
academics and government to support coffee producer in solving NTBs problem

may less efficient than it should realised. This situation was happened due to a
lack of communication between them. There are no formal relationship between
business, academics and government in supporting coffee producers. Each every
stakeholder creates its own project in supporting coffee producers. However,
sharing of information and knowledge can still happen indirectly on informal
form.
This study identified two barriers to information and knowledge sharing
process between business, academics and government. First, the government had
limited data about problems and solution that happened in business. On the other
hand, the business had limited trust in sharing their information and knowledge to
the government. This situation had result improper policy from the government to
support coffee producers. Second. Academics as a source technology and
knowledge had a limited meeting with business. This situation has happened since

academics‘ main task is to deliver education and not specifically help the coffee
producer. Academics do not have an obligation to provide NTBs solution to
business or government. Furthermore, the government had no sustainable
planning to coordinate sharing information and knowledge between academics
and businesses.
At the end, this study found possibility of adapting an innovation system

approach in guiding information and knowledge sharing between business,
academics and government. The government could take the role as a coordinator
for building and running this system. They could provide policy as a basic of
innovation system particularly in supporting coffee producer due to NTBs
problem. However, government should asked academics and other coffee business
to create this kind of system due to some limitation on technical and information.
As an alternative, this study also found a possibility of establishing independent
institution as a coordinator and bridge between stakeholders. However, there is a
need pre-establishment examination before building this kind of institution.
Keywords: innovation system, non-tariff barriers, processed coffee

RINGKASAN
ANDAR HERMAWAN. Eksploratori Adaptabilitas Pendekatan Sistem Inovasi:
Studi Kasus Dukungan pada Produsen Kopi Olahan Dalam Menghadapi
Hambatan Non-Tarif. Dibimbing oleh YANDRA ARKEMAN dan TITI
CANDRA SUNARTI.
Indonesia merupakan salah satu produsen kopi terbesar di dunia.
Berdasarkan data dari Kementerian Perindustrian Republik pada 2013, Indonesia
adalah penghasil kopi terbesar ke-3 di dunia dengan produksi sebanyak 748 ribu
ton kopi. Meskipun menjadi salah satu eksportir kopi terbesar di dunia, produsen

kopi di Indonesia hanya mampu mengekspor sebagian besar produknya dalam
bentuk biji kopi hijau. Ekspor produk kopi olahan hanya 20% dari total ekspor
kopi Indonesia. Situasi ini menjadi masalah karena hilangnya potensi pemasukan
produsen kopi olahan akibat perbedaan harga antara produk mentah dan produk
olahan.
Studi terbaru menunjukkan bahwa kenaikan tarif bea masuk bukanlah
penghalang utama untuk ekspor; melainkan prevalensi hambatan non-tarif (NTB)
yang membatasi kemampuan negara-negara berkembang untuk meningkatkan
ekspor olahan pertanian mereka. NTB biasanya ditetapkan dalam bentuk standar,
peraturan atau ketentuan lainnya. Tiap-tiap negara telah menetapkan jenis-aturan
untuk produk domestik dan impor. Akan tetapi, terdapat perbedaan kebijakan dari
tiap negara yang mengakibatkan perbedaan standar NTB antara satu negara
dengan negara lain. Oleh karena itu, diperlukan suatu pendekatan sistematis guna
memandu pola informasi dan sharing pengetahuan antara bisnis, akademisi dan
pemerintah.
Penelitian ini bertujuan untuk: (1) Meneliti efektifitas sharing informasi dan
pengetahuan antara bisnis, akademisi dan pemerintah dalam upaya membantu
produseb kopi olahan dalam menghadapi masalah NTBs; (2) Mengidentifikasi
penghalang yang membatasi sharing informasi dan pengetahuan antara bisnis,
akademisi dan pemerintah dalam upaya membantu produsen kopi olahan dalam

menghadapi masalah NTBs; dan (3) Memformulasikan bentuk sistem inovasi
yang dapat menjadi panduan sharing informasi dan pengetahuan antara bisnis,
akademisi dan pemerintah dalam upaya membantu produsen kopi olahan dalam
menghadapi masalah NTBs.
Studi ini menemukan bahwa sharing informasi dan pengetahuan antara
bisnis, akademisi dan pemerintah untuk mendukung produsen kopi dalam
menghadapi masalah NTB masih kurang efisien dari yang seharusnya. Situasi ini
terjadi karena kurangnya komunikasi antara pihak terkait. Tidak ada kerjasama
formal antara bisnis, akademisi dan pemerintah dalam mendukung produsen kopi.
Setiap pemangku kepentingan menggunakan upayanya masing-masing dalam
mendukung produsen kopi. Akan tetapi, sharing informasi dan pengetahuan
masih bisa terjadi secara tidak langsung secara informal.
Penelitian ini mengidentifikasi dua hambatan untuk informasi dan proses
berbagi pengetahuan antara bisnis, akademisi dan pemerintah. Pertama,
pemerintah memiliki data yang terbatas tentang masalah dan solusi yang terjadi
dalam bisnis. Di sisi lain, bisnis memiliki kepercayaan yang terbatas dalam
berbagi informasi dan pengetahuan mereka kepada pemerintah. Situasi ini

menghasilkan ketidaktepatan dalam pengambilan kebijakan oleh pemerintah
untuk mendukung produsen kopi. Kedua. Akademisi sebagai sumber teknologi

dan pengetahuan memiliki keterbatasan komunikasi dan kerjasama dengan bisnis.
Hal ini normal terjadi dikarenakan tugas utama akademisi adalah untuk
memberikan pendidikan dan tidak secara khusus bertujuan membantu
menyelesaikan problem produsen kopi. Pada prinsipnya akademisi tidak memiliki
kewajiban untuk menyediakan solusi NTB untuk bisnis atau pemerintah.
Pemerintah sebenarnya memiliki kemampuan untuk dapat koordinasi antara
akademisi dan bisnis. Akan tetapi mereka tidak memiliki perencanaan yang
berkelanjutan untuk mengkoordinasikan proses sharing informasi dan
pengetahuan tersebut.
Pada bagian akhir, studi ini menemukan adanya kemungkinan untuk
mengadaptasi pendekatan sistem inovasi dalam memandu sharing informasi dan
pengetahuan antara bisnis, akademisi dan pemerintah. Pemerintah dapat
mengambil peran sebagai koordinator untuk membangun dan menjalankan sistem
ini. Mereka dapat memberikan kebijakan sebagai dasar sistem inovasi terutama
dalam mendukung produsen kopi karena masalah NTB. Namun, pemerintah harus
meminta akademisi dan bisnis untuk membuat sistem semacam ini dikarenakan
keterbatasan teknis dan informasi. Sebagai alternatif, penelitian ini juga
menangkap kemungkinan pendirian institusi independen sebagai koordinator dan
penghubung antara para pemangku kepentingan. Namun, diperlukan penelitian
pra-pendirian sebelum mendirikan institusi semacam ini.

Kata kunci: kopi olahan, non-tariff barriers, sistem inovasi

Copyright ©2015, by Bogor Agricultural University
All Right Reserved
1. No part or 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 or all of this thesis may be transmitted and reproduced in any form
without a written permission from Bogor Agricultural University

EXPLORING THE ADAPTABILITY OF AN INNOVATION
SYSTEM APPROACH: A CASE STUDY IN SUPPORTING
INDONESIAN PROCESSED COFFEE PRODUCER IN
SOLVING NON-TARIFF BARRIERS

ANDAR HERMAWAN

Thesis
submitted to the graduate school in partial fulfillment of
Master of Science Degree
in
Agroindustrial Technology

GRADUATE SCHOOL
BOGOR AGRICULTURAL UNIVERSITY
BOGOR
2015

External Examiner: Prof. Dr. Ir. Marimin, M.Sc

Thesis Title

Name
Registration Number

: Exploring the Adaptability of an Innovation System
Approach: a Case Study in Supporting Indonesian

Processed Coffee Producer in Solving Non-Tariff
Barriers
: Andar Hermawan
: F 351137031

Approved
Advisory Committee

Dr. Ir. Yandra Arkeman, M.Eng
Chairman

Dr.Ir. Titi Candra Sunarti, MSi
Member

Agreed

Head of Program
Agroindustrial Technology

Dean of Graduate School

Prof. Dr. Ir. Machfud, MS

Dr.Ir. Dahrul Syah, M.Sc. Agr

Examination Date: 9th June, 2015

Submission Date:

ACKNOWLEDGEMENTS
Praise and gratitude to Allah Subhanahuwa Ta‘ala, because of Him, the writer
can complete this thesis as a part of requirements for achieving a Master Degree in
Bogor Agricultural University (IPB). The title of the thesis is Exploring the
Adaptability of an Innovation System Approach: a Case Study in Supporting
Indonesian Processed Coffee Producer In Solving Non-Tariff Barriers.
The writer want to convey a much of appreciation, especially for Dr. Yandra
Arkeman as a chairman of the advisory committee, Dr. Titi Candra Sunarti as an
advisory committee member, and Dr Scott Gordon as an advisor from University of
Adelaide. They guided all process of this research start from the idea development
through the writing process. I deliver special appreciations for Dr. Barry Elsey and Ms.
Amina Omarova from The University of Adelaide whose patiently guiding and
motivating me during this thesis journey.
I would like to express gratefulness to parties who gave their time and shared
their ideas and experiences in developing coffee industry. Mr. Jaya Gama and Faqih
Assyikin from Koperasi Mitra Malabar who share a new knowledge about coffee
industry. My gratitude to Dr. Indah Yuliasih for sharing her experiences and expertise
on processed coffee industry. I also deliver my appreciation to Mr. Mogadishu who
also my colleagues in Ministry of Industry for abundance data about coffee industry
development.
Apparently this research and this study will not be happen without scholarship
and full support of Pusat Pendidikan Pelatihan Industri (Pusdiklat), Kementerian
Perindustrian. So my highest appreciation for all officers in Pusdiklat. Last but not
the least, I want to show my appreciation to all Double Degree program, namely
Danang, Karim, Tri, Benny, Farda, Yani, Nur Aini, Dwi, Syarifa, Aditya, Dickie,
Ahmad Rudh, Koko, Nuni, Anin, and Iwan for every help and contribution. At last, i
want deliver many tankful for all my family and my wife Hanum Swandarini for all
motivations and wishes.

Bogor, July 2015

Andar Hermawan

TABLE OF CONTENT
LIST OF TABLE

vi

LIST OF FIGURE

vi

LIST OF APPENDIX

vi

1 INTRODUCTION
Statement of the Problem
Background and Need
Objectives of the Study
Research Questions
Significances to the Field
Limitation

1
2
3
3
4
4
4

2 LITERATURE REVIEW
Non-Tariff Barriers as a Barrier of Export
Innovation System Approach
Comprehensive Plan on Innovation System Adaptation
Summary

5
5
6
10
11

3 METHOD
Logical Framework
Research Framework and Procedure

12
12
13

4 RESULTS AND DISCUSSION
Effectiveness of Collaboration between Parties
Obstacles of Information and Knowledge Sharing
Adaptability of Innovation System Approach
Implication Management

16
16
18
20
23

5 CONCLUSION AND RECOMENDATION
Conclusion
Recommendation

25
25
25

REFERENCES

26

APPENDIX

29

LIST OF TABLE
Table 1 Indonesia Coffee Plantation Area and Production (2007-2013)
Table 2 Top 10 Coffee Exporters and Share of Word Export by Type of
Coffee in 2012
Table 3 Adaptation of CATWOE

1
2
21

LIST OF FIGURE
Figure 1 Soft System Methodology Stages
Figure 2 Research Framework
Figure 3 Current Information and Knowledge Sharing Rich Picture

12
13
16

LIST OF APPENDIX
Appendix 1 List of Questions
Appendix 2 Interviews Theming Table
Appendix 3 International Standards Organization (ISO) For Coffee Product

29
31
34

1 INTRODUCTION
Indonesia is a one of the biggest coffee producers in the world. Based on the
Ministry of Industry of the Republic of Indonesia (MoI) in 2013, Indonesia was
the 3rd largest coffee producer in the world with amounting to the production of
748 thousand tons of coffee. There are totally 1.3 million hectares of coffee
plantation in Indonesia. They composed of 1 million hectare Robusta variety
coffee plantation and 0.3 million hectare Arabica variety coffee plantation that
spreads almost all continents (Table 1).
Table 1 Indonesia Coffee Plantation Area and Production (2007-2013)a)
Plantation Area (Ha)

Year
Arabica

Robusta

Production (Ton)
Total

Arabica

Robusta

Total

2007

228,931

1,058,478

1,287,409

124,098

549,088

673,186

2008

239,476

1,063,417

1,302,893

129,660

553,278

682,938

2009

281,398

984,839

1,266,237

147,631

534,961

682,592

2010

251,582

958,782

1,210,364

146,641

540,280

686,921

2011

251,753

1,041,212

1,292,965

146,761

487,230

633,991

2012

252,645

1,053,250

1,305,895

147,017

601,092

748,109

2013b)
1,193,149
669,064
a)
Source: Ministry of Agriculture, Indonesian Coffee Exporters and Industries
Association (AEKI).; b) Preliminary figure.

Indonesian coffee farmers cultivate both Arabica and Robusta type of coffee.
Coffee plantations have grown on several provinces in Indonesia and became
sources of varies coffee bean (Panggabean 2011). There are several famous
Arabica coffee produce in Indonesia such as Gayo coffee form Nangroe Aceh
Darussalam province, Lintong and Mandailing coffee from Sumatera Utara
province, Kalosi Toraja coffee from Sulawesi Selatan province, and Bali coffee
form Bali province. Furthermore, there are more places in Indonesia that produce
a lot quantity of Robusta coffee such as Lampung province and Jawa Barat, Jawa
Tengah and Jawa Timur Province. Each of plantations is producing coffee beans
with different tastes and characteristics. Based on those circumstances, Indonesia
has an advantage in term of multi characteristics of coffee product. Most of them
have exported to some countries in the world. Coffee as one agricultural product
has plays an important role on Indonesian economic.
In International market, Indonesia is the 8th biggest exporter of all coffee
products or covering 4% of export from all countries to the world in the year of
2012 (Table 2). Furthermore, for the non-roasted and non-decaffeinated type of
coffee export, Indonesia is the 5th biggest exporter that supplies 5% of total
world‘s export. This table also indicated that Indonesia only become a big
producer of raw coffee product. Recently, exports of processed coffee like
decaffeinated coffee are dominated by developed countries such as Switzerland,
Germany, Canada, and Italy. However, export for on-roasted, decaffeinated coffee,
Mexico and Viet Nam as developing countries can stood in the big five exporters
that cover world export consecutively 9% and 4% despite Germany domination by
covering 68% of world export.

2
Table 2 Top 10 Coffee Exporters and Share of Word Export by Type of Coffee in
2012a)

1

Brazil

17%

Coffee, not roasted,
non-decaffeinated
Brazil
24%

2

Viet Nam

10%

Viet Nam

15%

3

Germany

8%

Colombia

8%

Spain

8%

Canada

9%

4

Colombia

6%

Honduras

6%

Canada

5%

Italy

8%

5

Switzerland

5%

Indonesia

5%

Viet Nam

4%

France

8%

6

Honduras

4%

Ethiopia

5%

Tanzania

1%

USA

6%

7

Italy

4%

Peru

4%

USA

1%

Belgium

5%

8

Indonesia

4%

Guatemala

4%

Belgium

1%

Czech

3%

9

Belgium

4%

Belgium

3%

Italy

1%

Spain

3%

10

Ethiopia

4%

Germany

3%

Colombia

Netherlands

2%

Rank

a)

All Coffee Product

Coffee, not roasted,
decaffeinated
Germany
68%

Coffee, roasted,
decaffeinated
Switzerland
36%

Mexico

9%

Germany

0.4%

10%

Source: UN Comtrade.

Statement of the Problem
Despite being one of the largest coffee exporters, Indonesian coffee
producers have exported mostly on less processed coffee products or green bean.
Export of processed coffee products was only 20% of the total coffee export. This
situation became a problem since there is a price difference between less
processed products and processed products. Indonesian coffee producers have
been losing their added value by exporting downstream coffee products due to a
cheaper price of less processed coffee products.
Indonesian coffee producers have concerned of this kind of situation. For
several years, they have tried exporting processed coffee into the world market.
However, they have faced several barriers such as import regulations, standards
and certifications. They found these kinds of barriers became a serious problem
(AEKI, 2014). Indonesian coffee producers struggled to solve this Non-Tariff
Barriers (NTBs) problem.
Recent studies have shown that tariff escalation is not the main barrier to
export; rather it is prevalence of non-tariff barriers that limits the ability of
developing countries to increase their agricultural processed exports (Melo et al.
2014; Mohan et al. 2013). Furthermore, Intracen surveys on November 2013
found that NTBs affected the most of agricultural goods exporters (51% of
surveyed companies). There were 66% of them felt burdensome by regulations
that applied by partner countries.
NTBs usually take the form of standards, regulations or other types of rules.
Countries have set these kinds of rules for domestic and imported product.
Protection of domestic consumer is the main reason for setting these standards.
However, difference policies on each country have resulted in different standards
of NTBs from one country to another. Difference stages of technology and
awareness between developed and developing country may have led a barrier for
developing countries in exporting their product to developed country (Valkila
2009).

3
Implementations of NTBs have arisen some problems that source from
developing countries as exporters. Although the regulations of NTBs made by
importing countries. Academics and business have had information and solutions
to support businesses fulfill requirements of NTBs. However, support from
academics and government was not adequate due to lack of coordination. This
kind of weakness may make the NTBs problem more complicated (Mohan et al.
2013). Therefore, there is a need to create a systematic approach that will guide
the pattern of information and knowledge sharing between business, academics
and government.
Background and Need
In Indonesia, government has made several actions to coordinate academics,
businesses and other government institutions. In 2009, the Ministry of Industry of
the Republic of Indonesia launched roadmap of coffee industrial development.
This roadmap did include NTBs as one of the external challenge for coffee
product development. Moreover, this roadmap listed some points about the
development of product quality, communication building between coffee
producers and standard fulfillment. These points may be a solution of NTBs
problem that have been faced by coffee producers.
Although government has created a roadmap plan for the coffee industry,
there was no particular technical plan to executing this roadmap. Therefore,
Indonesian coffee producers feel abandoned by government that have only given a
little information or strategy to the enter world market (SWA 2013). Moreover,
this roadmap did not include innovation and technological plan. This situation
seemed contrary to all main points of this plan that related to the quality
development of coffee products. Furthermore, this document did not put
academics‘ support on the technological aspect that may help business in solving
NTBs problem. Therefore, this roadmap may not sufficient for guiding
information and knowledge sharing process between business, academics and
government.
Objectives of the Study
This study aim to enhance support from academics and government to
Indonesian coffee producer in solving NTBs by exploring information and
knowledge sharing process between businesses, academics and government
institutions. This sharing process intended to support coffee processed producers
solving non-tariff barriers problems. Based on those results, this study identifies
some barriers that limiting information and knowledge sharing between business,
academics and government to support processed coffee producers solving nontariff barriers problems. Moreover, this study observes adaptability of innovation
system in guiding information and knowledge sharing between business,
academics and government to support processed coffee producers in solving nontariff barriers problems.

4
Research Questions
This study has several research questions to be answered, as follows:
1. How effective are business, academics and government in sharing information
and knowledge to support processed coffee producers in solving non-tariff
barriers problems?
2. What are the obstacles that are limiting information and knowledge sharing
between business, academics and government to support processed coffee
producers in solving non-tariff barriers problems?
3. How can innovation system approach guiding information and knowledge
sharing between business, academics and government to support processed
coffee producers in addressing non-tariff barriers problems?
Significances to the Field
There are several contributions of this research, as follows:
1. On the policy of innovation perspective, this study could give a new
perspective of policy design to support Indonesian coffee business in fulfilling
non-tariff barriers regulation based on collaborative problem solving.
2. In term of academic perspective, this research could contribute concerning
utilisation of innovation system theory to support coffee producer in solving
non-tariff barriers in Indonesia.
Limitation
This study is an exploratory study to examine the current condition of
information and knowledge sharing between business, academics and government
to support coffee process producer in solving NTBs problem. Therefore, this
study only focuses on three parties, business; academics; and government. This
condition made the data not represent all information and knowledge sharing
process to support coffee process producer in Indonesia. However, results of this
study could assist further research about information and knowledge sharing
process to help coffee process producer in Indonesia in solving NTBs problem.

2 LITERATURE REVIEW
Non-Tariff Barriers as a Barrier of Export
Non-Tariff Barriers Impact on Trade Flow
NTBs are several regulations or policies that can impact trade flows
(Baldwin 1989). NTBs have created by every country based on government
policies and strategies. The Reciprocity nature of NTBs has made a country
considering not only on the consumer side but also on producer side when
creating NTBs. Domestic producer capability in conform to the NTBs regulation
is necessary since it will be the base point of making NTBs. However, not all
countries can conform to these regulations due to differentiations of technology
and economic conditions. Several researchers find NTBs were made international
trade becomes more difficult and less efficient between countries (Bao & Qiu
2010; Clark & Zarrilli 1992). Consequently, NTBs become a barrier to the flow of
international trade.
Researchers also find NTBs were more stringent to agriculture products
(Henson & Loader 2001; Mohan et al. 2013; Rickard & Lei 2011). This fact has
happened since agriculture product usually has more regulation and standard than
other goods. Agriculture products like coffee are consumed directly by the human.
For this reason, there are more regulations to assurance consumer‘s health and
safety. However, these kinds of regulations have become obstacles for the
exporters of agricultural products. Developing countries with limited technology
development which typically depend on agriculture export have been suffering
because of this kind of barrier (Melo et al. 2014; Shepherd & Wilson 2013).
Main Types of Non-Tariff Barriers on Coffee Product
The healthy issue has been becoming a major concern for governments to
protect their national peoples. Sanitary standards, residue level of specific
chemicals, and quality standards are some of regulations that categorized as NTBs.
Therefore, consumers need safety and quality assurance concerning foods and
beverages. Researchers found that quality standard certification on food product
have successfully increased the quality of imported food products (Curzi et al.
2014; Olper et al. 2014). Therefore, countries have been creating regulations and
standards for those reasons.
On the recent development, those kinds of regulations have developed into a
trade protection instrument. Some researchers find that governments and policy
maker have set some regulations beyond necessity. Governments and policy
makers also have increased those standards in recent periods (Jongwanich 2009).
Governments and policy makers have deviated agriculture standards and
regulations from consumer protections into trade protection instruments.
Therefore, developing countries as agriculture products exporters have had higher
level of barrier in exporting their products.
One of the regulations in agriculture product is fairness regulation. Fairness
issues on agriculture product such as coffee product have been emerging in early
2000‘s (Raynolds 2002). Consumers in the developed country have had awareness
about the importance of equal profit sharing between producers, manufacturers

6
and traders. This situation led to an establishment of fair trade regulation.
Nevertheless, fair trade regulations are complicated. Small businesses in
developing country have had difficulties to understand and comply with this kind
of regulation. Valkila (2009) find only major exporter had the ability to comply
with fair trade regulation in developing countries. Several countries have been
creating fairness regulations to raise farmers and small coffee producers‘ welfare.
Nevertheless, limited information and knowledge have created more barriers for
farmers and small coffee producers to sell their products on international markets.
From the discussion as above, this was cleared that countries have
established NTBs in form of regulations and rules that can disrupt trade flow with
other countries. NTBs have become a barrier for exporting countries. Agriculture
producers have faced stringent barrier as a result of NTBs more than other
commodities producers. The nature of agricultural which directly consumed by
human have created more regulations to assure consumer health and safety.
Countries have increased strictness level of these kind regulations above the
necessity. They also have had the propensity to escalate regulations level
periodically. Fairness regulations have intended to give equality for agriculture
producer. However, limited information and knowledge of farmer and small
producers concerning these kinds of regulations have resulted in additional barrier
to export their agriculture product. NTBs have become a barrier for export of
agriculture product from developing country.
Innovation System Approach
Innovation on System Perspective
The innovation system is an approach that view and explore innovation
process based on system perspective (Carlsson et al. 2002; Lundvall 1988). This
concept was created as development guidance for the innovation process. This
approach viewed innovation process as an arrangement of national production
system, home-market economic position in international trade, interactive process
based on research, and institutional approach in innovative activities (Lundvall et
al. 2002). This perspective had a broader perspective than traditional views that
interpret innovation and economic growth as two separate entities. System
approach may explain a dynamic problem that involving information network,
communication between actors and creation of innovation concerning NTBs
problem in developing countries.
Using a system approach, a researcher could explore innovation process
from several dimensions. They are components, relationships and attributes
(Carlsson et al. 2002). Researchers defined components as operating parts of the
innovation system of, such as actors, organisations, research institutes, policy
maker and other related institutions. Components were became cores of an
innovation process. Each element of the system has a contribution to the
innovation activity. Therefore, deciding components are a crucial part of research.
A study needs an appropriate set of components to explore the problem. A bias on
components determination could result improper system analysis.
The second dimension of the system is relationships. Researchers were
defined a relationship as links between components. System approach views each
component's behavior and actions as one united action. Consequently, each party

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needs to connect with at least one other party. This system approach could help
answering the problem of collaboration between business, academics and
government to solve coffee processed producer‘s problem concerning NTBs. As
discussed in previous subchapter, regulations and rules of NTBs are varied.
Therefore, coffee producers have needed several parties to support them to fulfill
NTBs requirements. Based on Mohan et al. (2013), agriculture processed producer
in developing countries have faced problems of NTBs as a result of a lack of
coordination between related parties such as government and research centers.
Therefore, analysis of relationship may necessary to explore gaps of the
relationship between business, academics, and government. This approach may
also deliver some suggestions to solve the coordination problem.
The last dimension of system analysis is characteristics. Scholars were
defined characteristic as a particular feature that belongs to components and
relationships of one system. Characteristics have a connection with functions on
the system of innovation. Each sector or nation has it is own nature of the
innovation system. For that reason, this study explores characteristics of the
innovation system as one of the significant parts.
Researchers have developed several system approaches related to the
innovation process. They utilised system approaches to mapping innovation
process. The approaches are input/output analysis, sectoral innovation system, and
national innovation system (Carlsson et al. 2002). Each of every approach is
focusing on a different system of analysis. Utilisation of appropriate approach is
important to get a precise analysis and recommendation based on factual data on
the field.
Input/output analysis is the earliest approach that was developed to explore
the system of innovation. This concept is focusing analysis on the inflow and
outflow of goods in the economic system for a particular period (Leontief 1936).
The concept views a production as a function of capital and labor. Both of them
are linked with the others components to create a system of economic in a nation.
Input/output approach suggested that links between parties were flowing in oneway direction on industrial level. However, this approach failed to cover the
technology creation institutions and policy makers in the innovation system.
Therefore, this approach could inoperable to analyse complex system such as
interconnected infrastructure situation (Haimes & Jiang 2001). This concept is
improper to explore the complexity of collaboration between business, academics
and government in solving business‘s export problem because of NTBs.
The other innovation approach is sectoral innovation system approach. This
approach focused on the relationship between sectors or industries with the
different technological regime (Malerba 2002, 2005). This approach suggested
accumulation of basic technological aspects between actors and institutions as a
system. This system may generate innovation process and increase production.
Interaction between elements within the system may evolve technological and
knowledge by innovation process. This approach also viewed the innovation
process as a dynamic process through periods. Using this method, researchers
have an ability to explore changes and challenges in a business environment as a
part of the innovation system. However, this approach may not suitable for this
study. Based on the 2nd chapter, Indonesia coffee producers have faced NTBs as a
problem of their export. This problem have related not only to technology

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limitation but also within adequacy knowledge and information. Therefore,
sectoral approach on innovation system may become less suitable for exploring
this problem.
National Innovation System (NIS) approach is the widest framework of
innovation framework. This approach covers some parties such as business,
scientific, and government (Freeman 1995; Lundvall 1988; Nelson 1993). This
approach considered roles of a research institution, business and policymaker in a
single system on the national level. This concept viewed interactions between
actors as a factor that can determine a development of innovation process. This
approach may appropriate to this research since NTBs problem that faced by
Indonesian coffee producers were involving not only on the regional or sectoral
area but also on the national scale. Furthermore, coffee producers in Indonesia are
not concentrating in one area. They scattered around the country. Therefore, this
approach could cover the problem in the national scope.
NIS viewed knowledge as an important factor of innovation growth. This
approach also viewed knowledge as a factor that cannot become scarce like other
resources (Lundvall & Johnson 1994). Knowledge would continuously expand by
the interaction among actors in the system. Therefore, this approached suggested a
good knowledge management to support an innovation system.
Approaches on Innovation System
Researchers found communication and behavior pattern were important
factors on embedding knowledge into the system. Lundvall (2007) founds a lack
of infrastructure for communication and sharing information on developing
countries. This situation resulted in slow economic development in developing
countries. This fact may similar with facts on research background chapter of this
study. Indonesia as a developing country has had problems on the communication
network. Support for coffee business for solving on NTBs problem has become
less efficient due to weak information and knowledge sharing between related
parties.
NIS has a goal to enhance economic development of a country and develop
technology capability. However, the result of NIS adaptation is different between
countries. It is depending on the situation of the country (Bartels et al. 2012;
Intarakumnerd & Chaminade 2007). Based on the research, it is suggested that
government need to plan and implement policies to adapt NIS successfully.
NIS may be a suitable innovation system framework to guide collaboration
between business, academics, and government. However, NIS has a wide scope of
analysis. Consequently, this approach may lead the analysis into a complexity
analysis. This kind of analysis needs a large numbers of parties that related and
contributed to the innovation process. By using NIS concept, the researcher ought
to analyse each relationship between parties. Hence, it is crucial to determine the
right actors on NIS since every case tends to be different. The other issue of
application NIS is a chance for become less specific as a consequence of
simplification process of the complex system. Therefore, to apply the NIS, this
study needs some arrangements such as large amount of data from several related
parties.

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Triple Helix Model as an Analytical Model of Innovation System
Triple Helix Model (THM) is an analytical model to explore the complexity
system of innovation (Leydesdorff & Etzkowitz 1998; Leydesdorff & Zawdie
2010). Knowledge based on conceptual and empirical ground within the system
becomes the concern of THM. Researchers created this model to structuring
dynamics aspect of innovation on various levels. THM proposed three actors on
innovation system; they are academics as a source of research, business as a user
of innovation product and government as a policy maker. THM is ignoring the
concept of regionally based innovation system such as national, regional or cluster
level. This model may help the research on examining dynamic side collaboration
process in supporting businesses of the coffee product.
Researchers found that cooperation and relation between academia-industrygovernment is developed due to change of innovation regime (Etzkowitz 2003;
Etzkowitz & Leydesdorff 2000). The first model of intuitional sphere model is the
ecstatic model. This model reflected a situation when a government as a policy
maker leading the process of innovation. This model viewed government as the
only source of the innovation process. On the other hand, this model assumed
there are no relations between academics and business. Government as a prime
mover establishes the goal and procedural step of the innovation process. This
model applied in some countries that have socialism as a foundation. Liu and
White (2001) found a successful practice of this model in China. Centralise goal
setting, planning, and executing the process by China‘s government has resulted
in successful transfer knowledge and innovation creation. Government had the
power to rearrange institution structure and pattern of relationship between related
academics and business. This model may success in the country with central
planning regime. A country with democracy patron like Indonesia distributes
planning system to local autonomy government. Therefore, this model may
unsuitable for in Indonesia.
The second model is laissez-faire model. This model separated institutional
sphere by a secure border between institutions. This model viewed that business
and academics are working separately with competitive relation than cooperative.
Academics provide only basic research and trained personnel. However,
academics could transfer knowledge to business by graduate students that work in
business (Etzkowitz & Leydesdorff 2000). These persons share the knowledge
tacitly to other people within company. This model assumed government only acts
as the policy maker. Government action is limited on solving problems that
cannot be settled by academics and business. This model has become uncommon
in practice due to the globalisation process. Open information has pushed business
and academics relate each other rather than work separately.
The last model is triple helix model. This model viewed business, academics
and government merging into a new institution. Business, academics, and
government are working based on its role. They are working in a different area,
different size and different level of technology. They create an environment for
support development of innovation activities and knowledge-based economy.
Government encourages the innovation system by making policies on law and
financial aspect. However, government does not control the whole innovation
system. The knowledge economy concept becomes the ideal goal of
implementation triple helix model. This model may be ideal for countries that

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have a well information flow. However, an adaptation of this model by a
developing country may cause a problem due to institutional limitation.
Comprehensive Plan on Innovation System Adaptation
Innovation system provided a framework for guiding innovation process.
However, countries need technical steps in implementing this system. Researchers
created four stages of developing THM to provide step by step plan for
implementing innovation system (Etzkowitz & Leydesdorff 2000). The first stage
is the internal transformation of each party; they are business, academics and
government. On this stage, academics consist of several players such as research
institution, university, and other training institution. They facilitate share of
knowledge and transfer of technology. This pattern also applies to other two
parties, government and business. Government bodies ought to create well policy
coordination. Weak policy coordination may result in a weak framework of the
innovation system (Weber & Rohracher 2012). Government bodies ought to
streamline each other policy.
On the second stage, one party start connects with another. Academics as a
technology and knowledge source have a stable framework. They actively share
knowledge to industry. Government supports this framework by issuing a patent
guarantee for academics. Academics get a patent as a law protection of technology
copyright (Etzkowitz 2003). On this stage, government absorbs all information
and coordinate a solution concerning problems of innovation that faced by the
business. Government may find the real problem on the field based on the
company experiences. Therefore, Government could make a proper policy making
based on this bottom-up communication.
On the third stage, business, academics and government bodies created new
overlay relationship based on trilateral networks. They establish an organisation or
institution to provide broader knowledge sharing and coordination process. Based
on Ramstad (2009), this kind of organisation becomes the key to successful
Innovation system adaptation. This organisation becomes a center of knowledge
sharing process. Government supports this organisation by providing some laws
to sustain organisational activities. (Jacobsson & Bergek 2011). All parties;
business, academics and government institutions have a well coordination each
other.
On the last stage, triple helix network has developed into a larger society.
Information and knowledge sharing become freely distributed and stable
(Leydesdorff 2012). Knowledge sharing become expanding by the time since
spiraling effect between actors within the system. This stage is the ideal stage of
innovation system application in a nation. On this stage, economic development
was supported by knowledge capital and other capital such as financial.
All the stages is may be suitable for emerge innovation system in a country.
However, it will need some period to implement each of stages. Therefore, there
will be no sudden progress in innovation system condition along the process. On
the other hand, this process is required a political and planning stability so can be
worked sustainably.

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Summary
NTBs have become a barrier for export of agriculture product from
developing countries (Mohan et al. 2013). A lack of information and knowledge
sharing between business, academics and government have resulted a less
efficient support to businesses in solving problems concerning NTBs. This
problem is one of the research problems. There are some of innovation system
approach that may be appropriate to guide information and knowledge sharing
between business, academics and government (Leydesdorff & Ahrweiler 2014).
This study explores adaptability of innovation system approaches in solving
research problems.

3 METHOD
Logical Framework
Indonesia is one of biggest coffee producer in the world. However, most of
the export is in form of raw materials with low value added. One of the factors
that may become a barrier of coffee processed product export are NTBs. Coffee
producer especially SMEs have had difficulties to comply with high level of
standard that required by importer countries. Countries have been creating wide
variety of NTBs. Therefore, businesses need other parties such as academics and
government to support them. A lack of information and knowledge sharing
between business, academics and government has resulted less efficient of support
to NTBs. This study explores adaptability of innovation system approaches to
guide collaboration process between business, academics and government.
Indonesian coffee producers have found a number of NTBs as a barrier of
their export to international markets. Based on the previous chapter, researchers
found that supports to coffee producers for solving NTBs problem are involving
several stakeholders. They are coffee producer itself, academics as the owner of
technology and knowledge, and also government as policies and laws provider.
All stakeholders owned specific roles on these innovative activities. However,
coordination, information and knowledge are some of crucial parts that need to be
explored.

Figure 1 Soft System Methodology Stages
This research examines innovation system approaches to guide collaboration
between business, academics and governments in supporting coffee producers
solve NTBs problems. Therefore, this research taken place in Indonesia as one of
the biggest coffee producer in the world. This research used some of Soft Systems
Methodology (SSM) tools especially CATWOE principles to explore the
unstructured current condition, obstacles, and innovation system adaptability
(Checkland 1985). There are seven stage of SSM (Figure 1), start from
considering the complexity of problem, restructured the problem, create a
conceptual model based on root definition analysis, comparing the model with
real world, adaptation for implementing the model, and start the implementation.

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This research utilizes the SSM stage from the start to the caused root analysis
(CATWOE principles) to answer the adaptability of an innovation system.
Research Framework and Procedure
The basic aim of this research is exploring unstructured coordinating
process between stakeholders in supporting coffee producers in solving NTBs
problem. After exploring the unstructured current coordination, this research tries
to identify obstacles of coordination process between stakeholders. Based on these
identification processes, this research tries to formulate and suggest a system
innovation development steps to create innovation system for supporting
processed coffee producer. To accommodate all of these objectives, this research
applying Soft Systems Methodology (SSM) that provides several steps and tools
to examine complexity of current condition by utilising system models
(Checkland 1981, 1985).
Previous researchers have utilised SSM to approach problem system
approach, complexity theories, system dynamics and problem structuring method.
Mingers & White (2010) also identified broad application of SSM which one of
them in strategy and organisations. Specifically Xing et al. (2012) applied SSM to
formulate synergistically sustainable community development in term of socialeconomic transformation. They utilised SSM method especially CATWOE
method to propose the model. This research adopts the similar path to propose
several options of system approach for supporting coffee producer in solving
NTBs Problem (Figure 2).

Figure 2 Research Framework

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Sampling and Participant Description
First objective of this study is exploring current co