Local Entrepreneurship: Bring the Best from Our Home to the World

There is one question which always comes up when you are a student in the last year of your study in the university: what company do you plan to work?

In today’s world, the competition to get a job in big companies is harder than ever. The requirements for employment are higher every times, demanding students to master many qualifications suitable for the jobs.  For example is the ability in English language. Almost all big companies ask their employees to have English proficiency, since it is used in the global business environment.

The competition is exacerbated by centralized businesses and industries spread in the capital and big cities. These have become magnets which pull almost all the best human resources from the regions. Inevitably, the condition cause the imbalance development between the centers and other regions which responsible in social welfare inequity within the societies. Yet the resources which are needed by the businesses and industries come from these regions.

Each region has unique resources, natural and cultural, which are not found in other regions. Let us examine our local resources, in our ’home’; there are abundant potentials which are waiting to be exploited for the benefit of society. Let see Yeosu for example. We have such strategic geographic location for international hub in business and industrial trade. The ocean and its contents can provide enormous natural resources, yet they have not been developed optimally. The cultures, with many beautiful and historical places, can be great potentials for tourism. And the most important resources are its people, including the students as young generation. They are the driving forces for the development.

The question then is, how all of those resources can be actualized and bring the benefit for the society, especially for Yeosu people and all the country. At this point, we badly in need of science and technology. And to master them, we need education. Here is the point where university role is the most important. In fact, the university is the only appropriate institution which responsible to answer the challenges.

 Change of Mindset

To take the students interest back to their own local development, we need changes in our mindset. Having a carrier in big companies is not the only choice for works. There are bigger challenges and probably higher benefits offered than employment in big cities. And the most important, their works are highly needed by and give more values to the society they are living with. We may call the choice ‘local entrepreneurships’

It is not true that local businesses and industries are less challenging and not competitive. In fact, experiences form industrialized countries indicate that big companies which are well-known globally today came from small and local business units which develop into what they are today. Microsoft Corporation which is owned by the richest man in the world today, Bill Gates, was started by him and his partner Paul Allen from small company in Albuquerque, New Mexico. Or, Pizza Hut which came from small kiosk in Wichita, Texas and brought to almost every countries in the world today by Dan and Frank Chaney. Furthermore, the local entrepreneurships, which most of them are small and medium enterprises are the backbone of the economy and help many countries, including Korea to recover from their economy crisis a decade ago.

At this point, the students should change their mindset and may proudly pronounce them as ‘student today, entrepreneur tomorrow’, and we may see the bright future, not only for them, but also for the societies they are living with.

 The Role of Local Universities

The local universities, with embedded capacity in understanding potentials of their regions, should take the central role to develop local entrepreneurship. These universities have the best resources to do the function. They are the place for science and technology research and development. They have the best human resources, their professors, researchers and the students, infrastructure supports and scientific cultures to actualize the potentials through collaborative efforts. With all the abilities, local universities should identify local potentials which can be developed into competitive business units, not only in local or national levels, but also in the world.

The local universities are the focal point in the efforts to develop students’ abilities in local entrepreneurship. In fact, the students will be the future local entrepreneurs. To perform this function, the universities should encourage their students to enhance their competitiveness, in term of entrepreneurship. Integration of entrepreneurship skills, project managements, and business analysis to their curriculum is one of the efforts.

Empowerment of students in the creation of technology innovation for local industries by means of internship programs is another way to take. The existing internship programs with big industries which have been widely applied can be established also with local industries. Innovations created by the internship students with the guidance of university’s researchers are more accepted and easier to be implemented in local industries with more flexible operations than they are in big industries. Fresh and creative ideas from the internship students can lead to innovation and improvement of the business processes. And of course, these programs promote entrepreneurship among the students who able to learn more comprehensive business processes in local industries than in big industries.

From the academic point of view, the collaboration between local universities and industries requires the universities to perform science and technology research and development. The focus of these efforts should be given to appropriate science and technology development, suitable with local needs and resources. However, notes should be taken that local science and technology development does not always mean practical science or low technology. Instead, they can take form in advance and cutting-edge science and technology, as long as they are in accordance with local industries demand and resources. Silicon Valley and Stanford University is one of good examples. The development may also be synchronized with local or central government policy for the region, such as New University for Regional Innovation program in Korea. Again, the students can take benefit from this function. Through their involvements in the research and development activities, students can get the opportunity to enhance their expertise in their respective fields, which in turn will increase their competitiveness.

The functions of local universities to enhance students’ competitiveness in term of entrepreneurship addressed above require cooperation from all parties, i.e. the universities, industries, government, the society, and the most important, the students themselves. Now, is our turn, as students, to enhance our competitiveness, to answer the problems facing our society today, to take the challenge: will you be an entrepreneur? Will you bring the best from our home to the world? I will.

For Chonnam Tribune, Dec 07

REDEFINING SME-UNIVERSITY RELATIONSHIP

REDEFINING SME-UNIVERSITY RELATIONSHIP
TOWARDS SUSTAINABLE TECHNOLOGY DEVELOPMENT:
REGIONAL APPROACH*

Ardiyansyah

Small and medium enterprises (SMEs) play a significant function in achieving sustainable development in Indonesia and other developing countries. They have become a driving force of national economy growth by their dominant number of business entity and employment generation. Despite their important contribution, SMEs in Indonesia have performed far below than what they have been expected. One of the main reasons is the lack of technology and its innovation capabilities, which also leads to the use of inefficient technology and lack of environmental concern.

As parts of political reformation in Indonesia, the autonomy policies have been applied and the local/regional development responsibility has been decentralized toward more authorities of local government to develop their region based on their own society needs and potentials. These changes affect the SMEs, which most of them, in fact, operate in regional-based resources and markets.

On the other side, universities, which have the capacity in technology creation and innovation, are facing its own problems. Universities are in struggle in fulfilling their responsibilities i.e. education, research and public services, because of financial shortcoming as the result of higher education autonomy policy. Unfortunately, they have not optimized their capacity yet to gain financial support through abundant regional resources potentials. Based on these SMEs and universities conditions, new approach is needed to create mutual relationship between SMEs and universities which focused on regional development. With the right approach, SMEs and universities can play significant role in achieving sustainable development in the region.

STRUGGLING SMALL AND MEDIUM ENTERPRISES

Small and medium enterprises in Indonesia give important contribution for national economic growth. Last year, their production reaches more than half of the country’s gross domestic product. More than 90% (44.7 million) of all Indonesia’s business entities are SMEs. Moreover, more than 77.6 million employments belong to SMEs, and also with increasing trend at least for the last 3 years. Despite their important contribution and all the encouraging statistic data, SMEs in Indonesia face many challenges in order to grow and compete, or even to survive. One of the major challenges is the lack of technology and its innovation capabilities.

Certainly some SMEs have already possessed technology to run their businesses, even some of them have several technology learning mechanisms (Pappitek LIPI, 2005), but there are, at least, two reasons why those conditions have not been sufficient to increase the competitiveness of most SMEs. First, current technology capabilities possessed by SMEs are limited to basic technology which has been transferred from the owner or key staffs to the organization. These technology transfer processes are very slow and have limited ability. Their technology become obsolete within short time and their business can not be competitive anymore.

Second reason is based on the fact that most of SMEs which possess technology learning mechanism are operating as supplier for big industries and gain their ability from them, e.g. automotive and electronic components manufacturer. Those relations limit SMEs from other business opportunity and causing high dependency to big industries. Moreover, big industries tend to use imported technology as their principal country’s requirement; these may restrain their technology innovations.

The lack of technology innovation capabilities is not only causing slow down of local SME’s growth, but also threatening the sustainability of regional development by of utilization of technology which short of operational safety consideration, inefficient use of energy, and lack of environmental effects analysis. To overcome these problems, local SMEs are in urgent need of technology assistance from appropriate institution with sufficient technology development capacity. At this stage, it is clear that university is the best choice for the role.
 
UNIVERSITY: CHANGING ITS DIRECTION

In Indonesia, university’s responsibilities, namely tri dharma, consist of three pillars: education, research, and public service (regulated in National Higher Education Law -UU no. 20/2003). However, current condition depicts that only the first pillar has been emphasized, while the other two have been put aside. The increasing number of university (about 10% between 2004 and October 2006) and their graduates, have not been followed by the increase of research publications and public service programs. The trend now is that university is the place for ready-to-work employee generation only, with less concern in creation and dissemination of knowledge and technology, nor solution for public problems. The lack of financial support for researches and public service programs has become the main reason.

The National Education Department introduces university autonomy in 2001 for several state universities aiming for more independent operation, especially in their financial resources. Unfortunately, the policy has been responded mainly by increasing their education tuition double or triple times. Instead of trying to gain financial support from industry or public cooperation, they prefer to burden the cost to their students. Furthermore, other state and also private universities have followed the same step causing expensive education cost.

Bilateral cooperation between university and industry indeed has already become continuing program such as joint research, student’s internship and visiting lecturer from industry practitioners. However, these forms of cooperation have been limited to big universities and industries only which hold only small portions compared to high number of universities across the country. Furthermore, the creation and dissemination of knowledge and technology arising from such cooperation have been limited by the use of imported technology as the policy of industry’s principal company.

RE-DEFINED RELATIONSHIP

From the above mentioned conditions experienced by the SMEs and universities, it is clearly understood that new form of relations between both parties is needed to support the achievement of sustainable development. These relations should be based on local/regional approach as the basis for overall national achievement.

University has big potentials as the creator of appropriate knowledge and technology and its innovations which are deperately needed by SMEs. Those include knowledge, human resources such researchers and students, infrastructures such as research centers, and also government support. To actualize those potentials, the university should initiate cooperation with SMEs through creating technology research and development center which serves the need of local SMEs.

These centers examine technology and its innovation which fits the need of SME’s operations, provide technical assistance in form of technology training, workshop and consultation for SME’s staffs and also build awareness of environmental aspect of their operations.

As the first step, university, with the support of local government, should map and identify the regional resources potentials and existing SMEs operations on the region. The first one usually already available from the regional authority offices, while the latter requires further surveys. The outcome from this step is to determine knowledge and technology which is most needed by SMEs, local resources potential for new business creation and to generate appropriate technology development priorities.

The existence of the research and development center for SME’s technology innovations should benefit both SMEs and the university. The SMEs can obtain technology innovations and improve their efficiency, and after all, their business profits, while the university can acquire part of their financial support from the cooperation.

The business cooperation between SMEs and university generated in research and development centers may take form as allocation of dividend of SME’s profit for the university, intellectual property right or patent royalties, or as simple consultation fees for the university efforts in technology innovation generation used by SMEs. The application of business co operations above is expected to push both universitiy and SMEs to be more competitive.

University-SMEs relationship can also be developed by empowerment of students in the creation of technology innovation for SME’s by means of internship program. The existing internship program with big industries which widely applied can be established also with local SMEs. Innovations created by the internship students with the guidance of university’s researcher are more accepted and easier to be implemented in SME’s flexible operation than they are in big industries. Fresh and creative ideas from the internship students can lead to innovation and improvement of SME’s business processes. Furthermore, this program may promote entrepreneurship among the students who able to learn more comprehensive business processes in SMEs than in big industries.

The program also creates entrepreneurship. By becoming what known as technopreneur, students or alumnus can initiate new business units by utilizing technology innovations created within the center. These “incubation” SMEs can be treated as Spin-off Company of the center. However, priority should be given to business fields which are new and not threatening existing SMEs, and also create the most of potential resources of the region which have not been exploited before.

There are technical and non-technical challenges such as culture and policy problems which both the SME and the university should encounter. Technical problem may arise from the conflict between SME and university within the center. Those business relations created in the center, which in some extent is commercial, is vulnerable with conflicts if there are no clear definition of responsibilities, project financing, schedule, evaluation parameters and profit sharing agreements between both parties. They should define those details as clear as possible to avoid such conflicts. As the result, these co operations can support the autonomy of the university while at the same time, fulfilling their research and public services responsibility. Moreover, these business-type relations also push either SME or university to improve their competitiveness.

Beside SME-University conflict potential, problem may also arise from the staffs within the center which also university’s employee. In this case, university should provide suitable system which drives their staff performance in the center. Technology innovation generated by them should be highly appreciated by giving them reward or incentive. Intellectual property rights policies which assist their creation are also need to be applied.

Although research and development cooperation is executed based on both SME and university agreement, both parties have different approach caused by different innovation cultures. SME, in one side, consider research and development activity as one of its processes to support their business, hence, is profit-oriented. On the other side, University treats research and development as scientific activity which follows formal academic method and verification, hence should be independent and profit-free. This problem can be solved by clear definition of the project’s scope. SMEs should consider sustainability of their technology development, not only short term objectives, while university should also consider the applicability of their innovations within time and budget. Efforts to bridge the difference from both sides is highly required in order to promote positive relation which generates synergist cooperation to achieve sustainable development.

Needless to say, SME-University positive relationships as described above need supportive policies from the government, especially from local government. Current conditions depict the lack of regional science and technology development policy, un-synchronized policy between central and regional authorities and difficult macro-economy conditions-which make SMEs difficult to grow, or even to survive. These challenges can be solved by synergist relationship between government, SMEs and university in regional and national level. However, as the primary step, implementation of relationship between SMEs and university as discussed above is essential. SMEs and university can create positive approach through the center to local government for creating policy which supports their cooperation. For the next development, these relations can be extended to involve other research institutions such as regional research board or government agency research unit.

CONCLUSION

Facing new challenges in achieving sustainable development, the SME-university relationship should be re-defined based on regional approach. Synergist co-operations in form of join formation of research and development center, internship program, and incubation of new business units can enhance both sides into highly competitive institutions which can play important role in achieving sustainable development in regional and national level.

* Submitted to ADB Essay Contest, March 2007, please cite as: Ardiyansyah.2007. Redefining SME-University Relationship. www.teknologiberkelanjutan.wordpress.com