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ASEAS 13(1) | 17
Local Tourism Businesses in Indonesia: A Pathway to Crisis-
Resilient Development?
Heidi Dahlesa, b, Titi Susilowati Prabawac, & Juliette Koningd
a Grith University, Australia; b Cambodia Development Resources Institute (CDRI);
c Universitas Kristen Satya Wacana, Indonesia; d Oxford Brookes University, UK
► Dahles, H., Prabawa, T. S., & Koning, J. (). Local tourism businesses in Indonesia: A pathway to
crisis-resilient development? Austrian Journal of South-East Asian Studies, 13(), -.
The aim of this paper is to explore ways in which small tourism-based enterprises can offer
a crisis-resilient pathway to sustainable development. Based on a mixed-embeddedness
framework, this paper explores the multiple strategies that small enterprises in the silver
souvenir industry of Kotagede (Yogyakarta, Indonesia) applied to cope with hardship
during the Indonesian decade of crisis (-). The data on which this paper builds
stem from qualitative research conducted in Yogyakarta over a time span of years. This
paper makes two contributions to the current literature. The first contribution is to offer
empirical, longitudinal, primary data on small-firm performances against the background
of fluctuations in the tourism industry. The second contribution is conceptual, arguing
that an embeddedness approach, sensitive to location-specific characteristics, promises
a better understanding of small tourism enterprises as crisis-resilient development path-
ways. In doing so, this paper also asserts that small businesses, due to their embeddedness
in household economies and subcontracting arrangements that include rural labor, have
the capacity to become agents of the United Nation’s Sustainable Development Goals.
Keywords: Embeddedness Framework; Indonesia; Silver Souvenir Industry; Small Business;
Sustainable Development Goals
INTRODUCTION
Meeting the ambitions of Agenda , with its Sustainable Development
Goals (SDGs) at heart, implies an unprecedented effort by all stakeholders, includ-
ing governments, civil society, and the private sector (Verboven & Vanherck,
). As small, private enterprises account for an overwhelming majority of
economic activity in both developed and developing countries, business has a
significant role to play in this process (Kamal-Chaoui, ). The current dis-
course revolves around what businesses, large or small, can do to contribute
to the SDGs (Apostolopoulos, Al-Dajani, Holt, Jones, & Newbery, ). At the
same time, there is an undercurrent implying that small businesses, particularly
in developing countries, may lack the resources, knowledge, and motivation to
advance the SDGs (Auemsuvarn, ). Equally, small entrepreneurs may won-
der what the SDGs can do for them to keep their businesses afloat in the face of
economic hardship, adverse regulations, and weak institutions.
Aktuelle Südostasienforschung Current Research on Southeast Asia
www.seas.at doi 10.14764/10.ASEAS-0027
18 | ASEAS 13(1)
Local Tourism Businesses in Indonesia
This paper argues that the SDGs can only be achieved if countries manage to build
strong small businesses. The tourism industry has been widely commended for its
potential to help achieve sustainable development, as small tourism businesses, in
particular, have been acknowledged for providing income and jobs for many peo-
ple. In doing so, they contribute to poverty alleviation efforts (Scheyvens & Hughes,
, p. ).
To develop this line of thought, this paper presents a case study focusing on
local silver workshops in the neighborhood of Kotagede in Yogyakarta (Indonesia),
which rose to international fame in the 1980s and 1990s when its ancient silver
industry became a major tourist attraction. Yogyakarta is Indonesia’s second tou-
rist destination after Bali, and is renowned for its cultural heritage (Dahles, 2001).
Starting in the mid-1990s, crisis after crisis hit Indonesia, badly affecting internati-
onal tourist arrivals. What is known as the ‘decade of crisis’ (Susilowati, 2010) began
with forest fires ravaging Kalimantan, followed by the Asian economic downfall in
1997, which initiated social unrest, political riots, and, in 1998, a change of govern-
ment. While still politically unsettled, Indonesia’s primary tourist destination, the
island of Bali, encountered terrorist attacks in 2002 and 2005. The earthquake that
struck Yogyakarta in 2006 destroyed the livelihoods of many local people and had a
profound impact on visitor arrivals to the city, as Table 1 illustrates.
To the present day, the silver industry in the neighborhood of Kotagede represents
one of the vital tourist attractions in the Yogyakarta region. Comprised of small silver
workshops and retail outlets, this industry is embedded in both the local, particularly
tourism-based, and global economies, in terms of the silver market and handicraft
trade. The concept of embeddedness is pivotal in understanding the decline and sur-
vival of the silver industry. Developed in the context of entrepreneurship studies, the
embeddedness perspective is a heuristic device that understands entrepreneurship
and small businesses as closely intertwined with their social contexts and institutional
environments (Granovetter, ; Jack & Anderson, ). From an embeddedness
perspective, the aim of this paper is to investigate how the owners of Kotagede’s silver
workshops responded to challenges emerging from crises unfolding between
and , and how decisions taken at the time led to the survival of many individual
businesses, but also the demise of the silver industry. This perspective demonstrates
how a longitudinal approach can add to our understanding of “historically consti-
tuted strategic agency” (Vaara & Lamberg, , p. ).
This paper makes two contributions to two diverging but interrelated bodies
of literature. The first contribution is conceptual, proposing a multidisciplinary
approach to tourism businesses by marrying findings from tourism studies to
entrepreneurship studies, particularly through a contextualized understanding
of small firm strategy. This paper argues that an embeddedness approach, sensi-
tive to location-specific characteristics, promises a better understanding of small
tourism enterprises as crisis-resilient development pathways. The second con-
tribution is empirical, offering detailed and longitudinal primary data on small,
tourism-dependent firm performances against the background of fluctuations in
the tourism industry. The data on which this paper builds stem from repeated
qualitative research conducted in the city of Yogyakarta over a time span of
years, and provide important insights into business resilience. In analyzing these
ASEAS 13(1) | 19
Heidi Dahles, Titi Susilowati Prabawa, & Juliette Koning
data, this paper also addresses the question of what potential small businesses offer
to become agents of the SDGs.
The next section of this paper discusses the conceptual embedding of the
research and the research approach, including the research setting. This is followed
by an empirical part presenting the shifting coping strategies of the silver producers
in the Yogyanese neighborhood of Kotagede during the decade of crisis and beyond.
These findings are then analyzed and interpreted in terms of a mixed embeddedness
approach. The paper concludes with a conceptual reflection and an outlook on post-
crisis recovery, proposing small businesses’ contributions to the SDGs.
20 | ASEAS 13(1)
Local Tourism Businesses in Indonesia
SMALL FIRMS, MIXED-EMBEDDEDNESS, AND NETWORKS
In entrepreneurship studies, there is a growing interest in the concept of embed-
dedness, particularly for research at the intersections of economics, sociology,
anthropology, and organization sciences. From an embeddedness perspective, entre-
preneurship and small enterprises are understood as contextualized social phenomena
(Drakopoulou Dodd & Anderson, ; Granovetter, ; Jack & Anderson, ;
Kalantaridis, ; Su & Chen, ; Swedberg, ). Economic activities, the entre-
preneurial process, and the entrepreneur are seen as socially embedded, as social
relations are considered valuable to firm creation and, “the art of running a business”
(Ulhoi, , p. ). Such social embeddedness is relevant because it helps the entre-
preneur identify the necessary resources for founding a firm (Jack & Anderson, ),
or further developing the enterprise (Drakopoulou Dodd & Anderson, ). In this
vein, embeddedness has become an important concept in development literature to
consider the resources that networks and institutional environments offer to individ-
uals and organizations (e.g., Su & Chen, ; Trupp, ).
Originating in Karl Polanyi’s () work, the embeddedness perspective is crit-
ical towards the homo economicus of neo-classical economics, and challenges the
suggestion that markets operate independently of, and are unaffected by, social
relations and cultural dynamics. Instead, Polanyi () argued that economies are
socially constructed, politically mediated, and historically situated. In reintroducing
Polanyi’s embeddedness concept, Granovetter () has been responsible for what
Portes () coined, “the rebirth of the sociological study of the economy” (p. ; see
also, Aspers & Dodd, , p. ).
Granovetter’s perspective on social embeddedness has received some criti-
cism, particularly from the adjacent field of immigrant entrepreneurship studies.
Kloosterman and Rath () criticized this concept for neglecting the macro-level,
or the politico-institutional dimensions such as state policies for business start-ups
and the opportunity structure. Changes in the economy that create or obliterate
opportunities for new businesses and/or for expanding existing firms are as rele-
vant as social embeddedness, Kloosterman and Rath () argue. To capture these
complexities, Kloosterman and Rath () developed a framework that offers a
more comprehensive approach to the study of economic behavior. Their mixed
embeddedness perspective (Kloosterman, , ; Kloosterman & Rath, ;
Kloosterman, Van der Leun, & Rath, ) pays equal attention to the entrepreneur
or business owner – who is embedded in social relations that provide access to capi-
tal, labor, and opportunities – and to the institutional environment, including rules
and regulations, urban developments, and the economic and political environment.
The mixed embeddedness perspective is a relevant addition to the field because
of the combined attention to the micro-level (the entrepreneur), the meso-level (the
local opportunity structures), and the macro-level (the institutional environment)
(Kloosterman, ). While this model has become a prominent conceptual device
in the study of ethnic or immigrant entrepreneurship, it is applicable to small busi-
nesses at large (Kloosterman, , p. ). For the purpose of this paper, the meso
and macro dimensions of the mixed embeddedness perspective are highly relevant,
as the small business owners under study experienced rapidly changing opportunity
ASEAS 13(1) | 21
Heidi Dahles, Titi Susilowati Prabawa, & Juliette Koning
structures caused by a series of crises while dealing with a volatile institutional envi-
ronment, particularly the regime change and its aftermath.
At the micro-level, that of the individual small business owner, much attention
has been directed to the role of networks and networking (see in particular, Hoang &
Antoncic, ; Jack, Moult, Anderson, & Dodd, ; Nee & Opper, ; Neergaard,
). Social networks provide access to a variety of resources, including a pleth-
ora of social arrangements for individual members of households who rely on social
networks for their livelihood, as much as for enterprises that employ network rela-
tions in order to gain access to resources (Philipson, Bennett, Lowe, & Raley, ).
However, a few questions remain unanswered, such as: What kind of social relations
play what kinds of roles in a given network? Are all social relations beneficial to an
actor in the same way?
To answer these questions, it is worthwhile to turn to another work by Granovetter
(), on the strengths and weaknesses of social ties, which offers a conceptualiza-
tion of different forms of social relations in a network. The strength of social ties,
Granovetter () argues, is related to time, intimacy, and reciprocity. In other words,
the higher the level of emotional intensity, intimacy, and reciprocal services, the
stronger the ties are. Strong ties typically are associated with friendship and familial
relationship. In contrast, weak ties entail relationships with less investment of time
and intimacy, and may transpire among social acquaintances (Granovetter, ).
Various authors (Peng & Zhou, ; Stewart, ) emphasize that entrepreneurs
need both extensive weak ties and strategic strong ones in order to remain flexible in
a rapidly changing market.
Such work that focuses on strong and weak social ties, provides an understanding
of networking, but much less so of the network itself; in other words, such work is
more process-oriented and less concerned about the actual network structure (Jack
et al., ). Literature on networks and networking seems to lean towards a rather
instrumental and resource-based focus, addressing the ways in which networks and
networking provide information and access to resources. This paper argues that, by
incorporating network ties into a broader embeddedness approach, a more nuanced
perspective is offered. Taking the local context seriously implies that the role and
meaning of norms, values, and systems of reciprocity and exchange are taken into
consideration (see Hüsken & Koning, ).
Social networks are in fact maintained by systems of exchanges. Exchange is a
classic topic in (economic) anthropology, addressing the idea that there are various
exchange models and that the manner in which material goods are distributed is in
agreement with the basic values and institutions of the society under study. Apart
from economic benefits, networks also generate several immaterial benefits, such as
enhanced well-being, a sense of identity and belonging, social status, and prestige.
As the aim of this paper is to provide a contextualized exploration of the ways in
which small business owners manage profound change unleashed by enduring crises,
a focus on the material and immaterial qualities of network ties is needed.
All of these considerations contribute to an analytical framework that is based
on the concepts of mixed-embeddedness, as coined by Kloosterman () and
inspired by Kalantaridis’ () idea of small businesses as contextual agents. Hence,
this paper employs three levels of investigation: () the macro-level, consisting of the
22 | ASEAS 13(1)
Local Tourism Businesses in Indonesia
institutional environment, in this case encompassing state regulations related to
industry and national concerns (Indonesian government, tourism, and crisis); () the
meso-level of the opportunity structure, in this case represented by market opportu-
nities and threats related to the recurring crisis incidents in the city of Yogyakarta in
the decade of -, and post-crisis market transformations; and () the micro-
level of the entrepreneur and the small firm, the interactions of social relationships
(networks, strong and weak ties), firm size (small and medium), and business char-
acteristics (product, market, pricing policies, labor/employment, diversification, and
assets). The aim of this framework is to guide the analysis towards a comprehen-
sive and dynamic understanding of business conduct among small firms, viewed as
embedded agents of crisis-resilient development.
METHODOLOGY
This paper builds on the interpretive tradition in social research in that it aims to
understand the ways in which business owners, as knowledgeable actors, interpret
their own and other people’s actions and behaviors (Berger & Luckmann, ). Since
human sense-making is viewed as constructed and negotiated (Schwartz-Shea, ),
this paper is concerned more with the “description of persons, places and events”
(Janesick, , p. ) than with attempts at generalizing across time and space. In
order to obtain such in-depth understanding, considerable time was spent with the
people under study.
The research has been conducted in the city of Yogyakarta in three separate
phases stretching over a time span of years. The baseline study was undertaken in
pre-crisis Yogyakarta, in -, focusing on ways in which small-scale businesses
engaged with international tourists (Dahles, ). The city is a gateway to the famous
temple complexes of Borobudur and Prambanan, and visitors stay in Yogyakarta a
few more days to enjoy its cultural attractions, particularly the traditional Javanese
arts and crafts. One of the focal tourism areas investigated was the neighborhood of
Kotagede. A decade on, in -, another in-depth study was conducted in the
city, which was already affected by a decline in international tourist arrivals in the
aftermath of the Asian financial crisis and the Bali bombings. During the fieldwork,
the area was hit by the earthquake which caused major destruction, particu-
larly in Kotagede, and dramatically affected local livelihoods (Dahles, ; Dahles
& Susilowati, , ; Ferguson, Dahles, & Susilowati, ; Susilowati, ).
In , follow-up research was undertaken in Kotagede in order to establish what
became of the silver workshops a decade after the end of the crisis.
Kotagede, established in the th century as the former capital of the Mataram
Kingdom, is a center of Javanese arts and crafts, including silver craft, and renowned
for its traditional Javanese houses with their joglo roofs (Wijayanto, ). When
tourism was soaring, the narrow streets of Kotagede, lined by hundreds of workshops
and showrooms, were packed. In the late s, about craftspeople worked in
Kotagede, producing silverware for local use and export (Yuliantoro, ). After the
earthquake, their number fell to - according to varying unocial estimates
(Yuliantoro, ). Gadja Mada University, supported by overseas sponsors, is run-
ning a program to revitalize the silver craft industry (Ikaputra, ; Wijayanto, ).
ASEAS 13(1) | 23
Heidi Dahles, Titi Susilowati Prabawa, & Juliette Koning
In all three research phases (-, -, and ), data gathering
was organized around a business-life history approach that investigates narratives
of personal experiences in tandem with records of business development (Dahles,
; Koning, ; Vaara & Lamberg, ). The firms in our sample are small
enterprises employing between and workers. The employment model of these
firms includes a mix of waged and family workers, with flexible job descriptions and
simple management structures. The dataset was established by means of purposive
sampling. Most of the silver showrooms lining the main street of Kotagede were vis-
ited, and an interest was shown in the products displayed. In cases where these visits
resulted in friendly conversations with the salespersons, the wish to meet with the
business owners was expressed and the research purpose of the visit was revealed.
This approach resulted in eleven enterprises willing to collaborate with this research
over an extended period of time. During the height of the crisis, only five of these
firms were available for the research as many were temporarily out of business due
to the destruction caused by the earthquake. In , the original eleven enter-
prises participated again in our post-crisis assessment.
Throughout the three research phases, repeated semi-structured interviews with
the owners were conducted in order to explore the nature and structure of the busi-
nesses, the challenges faced, achievements reached, and coping strategies employed
under changing conditions. Observations complemented this method and focused
on interactions between owners and employees, users and buyers at the business
level, and between businesses at the neighborhood level. The data gathering was
conducted in the Javanese or Indonesian language, and occasionally in English. Most
of the interviews were tape-recorded in agreement with the interviewees, whose
informed consent was obtained. In some cases, where recording was refused or
impossible, notes were taken, which were elaborated into full reports soon after the
interviews were completed. The recorded data were transcribed and translated into
English. The texts were then matrix-analyzed at two different levels, a descriptive
level and a synthesizing level (see Miles & Huberman, ; Ritchie & Lewis, ) in
order to identify the similarities and differences in the business strategies and coping
mechanisms between the eleven firms and across the three different time-frames. In
the following section, these business strategies and coping mechanisms will be pre-
sented and their post-crisis outcome will be discussed.
THE SILVER PRODUCTION SECTOR IN KOTAGEDE
Originally established to provide silverware and jewelry for the royal palace in
Yogyakarta, Kotagede’s silver industry changed over time in response to the needs
and the tastes of the market (Wijayanto, ). International tourism had a profound
impact on this industry and the livelihood of the Kotagede silver producers. They
gradually invested their increasing income in the expansion of their property and
businesses, hired more laborers, built more workshops, and produced more mer-
chandise (Dahles, ). By , after about years of continuous market growth,
the silver production in Kotagede was still very much family-based, as Susilowati’s
() research on economic strategies of the small silver workshops shows. Family
members carried the primary responsibility for the production and sale of the
24 | ASEAS 13(1)
Local Tourism Businesses in Indonesia
home-produced silver items; and a flexible workforce aliated with the workshop
was hired when needed.
Production served different markets (retail, wholesale, and export) and was com-
monly organized in a combination of the factory-based and the putting-out system.
In the factory-based system, a business owner hired craftsmen who specialized in one
particular task in the production line, to come to work in his home-based workshop.
In pre-earthquake Kotagede, most silver workshops combined onsite production in
the business owner’s home, with the sales of these home-made products in a street-
side shop. Tourists who entered the shop were invited to visit the workplace in the
backyard. In the putting-out system, on the other hand, the business owner out-
sourced the production to a third party, an intermediary, who then hired craftsmen
working from their own homes. In this system, the production process was broken
down into smaller and smaller tasks, which were subcontracted and spread through-
out a network of collaborating craftsmen and workers. In pre-earthquake Kotagede,
most business owners used the putting-out system to reduce their workload while
maintaining their network of skilled craftsmen in the rural areas.
Before the earthquake, the silver producers, in response to a series of crises
that unfolded from the mid-s, were forced to introduce a number of measures to
cope with declining sales and rising business costs (Susilowati, ). The economic
crisis of increased the exchange rate of the U.S. dollar towards the Indonesian
rupiah, which was subsequently followed by an increase in the price of raw silver. As
a consequence, many silver producers with a local market orientation went bankrupt.
However, those local businesses that served an international export market could
temporarily enjoy huge profits because their sales rates were in U.S. dollars. This situ-
ation did not last long because a series of political and social upheavals, related to the
regime change, caused tourist arrivals to drop drastically (see Table ), and silver
sales for both export and local markets slowed down (Susilowati, ).
The diculties were building up and the silver producers faced the need to reduce
production costs and decrease the number of workers (Susilowati, ). Inevitably,
employment in the silver industry came under pressure and seven out of the eleven
producers in our sample gradually laid off their workers. Unsurprisingly, the put-
ting-out system received a boost, as business owners had to adjust logistics from
keeping stocks to producing only on order to avoid financial loss. The independent
craftsmen operating under the putting-out system were provided with raw silver and
received their payments upon delivery of the finished products. As the crisis deep-
ened, many workers abandoned the silver trade for better paid jobs, such as in the
construction industry, while the workshops resumed to involve un(der)paid family
members in the production process. Finally, business owners had to use their savings
to pay for rising living expenses. In the most pressing situations, they melted their
silver stocks and sold the silver to feed their families.
As the crisis mainly affected international tourist arrivals, domestic tourism con-
tinued to thrive in Yogyakarta (see Table ). In response, the silver producers began
to explore the domestic retail market, which required drastic changes in their assort-
ment and pricing policy. First of all, the business owners, while grappling with high
prices for raw silver, had to offer sharper discounts to attract domestic customers,
who outnumbered international tourists but whose purchasing power was much
ASEAS 13(1) | 25
Heidi Dahles, Titi Susilowati Prabawa, & Juliette Koning
26 | ASEAS 13(1)
Local Tourism Businesses in Indonesia
weaker. In the late s, after the economic crisis, many shops started to sell cheap,
machine-made, mass-produced silver products purchased from Balinese wholesalers.
Producers also reverted to plating rather than using pure silver. Table above pro-
vides an overview of the coping strategies developed by the workshops in our sample,
differentiated by crisis and duration.
The earthquake severely affected Kotagede as the epicenter was located close
to this area. Many buildings were wiped out and all economic activities in Kotagede
were paralyzed for several months. The earthquake caused six out of the eleven
enterprises in our sample to temporarily shut down production, as their homes and
workshops were either destroyed or seriously damaged. Many entrepreneurs had to
use their business capital to pay for their daily needs and to repair their houses. Due
to their traditional financial management, in which there was no separation between
household and business finances, entrepreneurs could flexibly divert cash from their
businesses to cover household expenses (Susilowati, ). While most Kotagede
households were eligible for modest government support, these payments were not
sucient to cover the costs of home repairs and daily needs. Hence, local people
sought alternative employment to make ends meet.
During the authors’ recent fieldwork in , eleven years after the earthquake
struck, Kotagede still wore the scars of disaster. Many of the destroyed buildings had
not been fully restored, and the silver workshops they once accommodated were
gone. The main street of Kotagede is still lined by silver shops, among which are ten
of the businesses in our sample. All but one have survived the decade of crisis, includ-
ing the earthquake, and are back in business (see Table ). However, these shops are
only retail outlets and the workshops in the backyard are gone. The owners have
given up the production of traditional Kotagede silver, and the local craftsmen they
used to employ have moved to rural areas or sought employment in other industries.
Kotagede’s silver shops are currently buying their merchandise in Gunung Kidul, a
poor rural area east of Yogyakarta, and in East Java or Bali, where small manufactur-
ing businesses have emerged, producing cheap, machine-made silverware. To cater
to an increasingly domestic tourism market (see Table ), these shops also offer cheap
souvenirs and trinkets made of aluminum and copper.
DISCUSSION
Between and , three coping strategies stand out as most widely applied
by the Kotagede silver producers: () the use of savings/assets, () the switch to
the domestic market, and () changes made to employment arrangements. In this
section, these three strategies will be discussed in tandem with the multi-level frame-
work developed above, distinguishing between the macro (political-institutional),
meso (opportunity structure), and micro (small business) level of embeddedness (see
Kloosterman et al., ; Kloosterman, , ).
The first and widely applied coping strategy was the use of financial savings and
other assets, which was particularly significant at the start of the crisis in /
and after the earthquake in . In fact, using savings was not uncommon in
tourism-related businesses, as this was often required to bridge the low tourist sea-
son when there was no income. The silver producers resorted to selling raw silver
ASEAS 13(1) | 27
Heidi Dahles, Titi Susilowati Prabawa, & Juliette Koning
material because production was slowing down and a small profit could be made
from price fluctuations. Under crisis conditions, there was a depletion of resources
to reinvest in businesses, and, in the long run, this had severe consequences for
future business development and led to the demise of traditional silver craftsman-
ship in Kotagede.
As the consumption of personal and business assets brought only temporary
relief, the severity of the crisis called for more drastic measures. A second, widely-
embraced business intervention in response to the economic crisis was to switch
from the international to the domestic market. This intervention was encouraged
by government policies. The Indonesian government launched an intensive cam-
paign to promote domestic tourism in , and, after the first Bali bombing in ,
extended the number and duration of national holidays. This policy had a positive
effect on the flow of domestic tourists to a variety of popular tourist destinations,
including Yogyakarta. The government’s leisure policy ‘created’ a demand by facilitat-
ing ‘time’ to local tourists to travel to different parts of the country.
Here, we witness the interaction between the institutional dimension and the
subsequent opportunity structures, or the macro and meso dimensions in the mixed
embeddedness framework. As argued by Kloosterman (, ), opportunities
(e.g., to start a specific business or launch a specific product) go hand in hand with the
interplay of supply and demand of markets. However, the entrepreneurs also need
the appropriate resources (such as social networks and capital) in order to be able to
access a particular opportunity. This connects the institutional and opportunity level
to that of the small business owner (see Kalantaridis, ; Kloosterman et al., ).
However, the case of the Kotagede silver producers shows that the small firms did
not have access to the appropriate resources, nor did they offer the right product. The
silver producers were flexible enough to adapt to the adverse situation and eventually
adjusted to the changing market. Unfortunately, this adaptation came at a cost – a
loss of income, skilled labor, and favored clientele – and contributed to the demise of
the traditional Kotagede silver craftsmanship.
Over the years, the silver industry had adapted its businesses to foreign tastes
and budgets. This focus enabled them to maintain a relatively high price level that
met the demands of foreign tourists. The shift to the domestic market was perceived
locally as a step back in terms of the quality of the silver crafts offered and the earn-
ings generated. Facing toughening competition in the local tourism industry, the
silver producers had to offer their products at a lower price and make adjustments
to their assortment to please the tastes and budgets of the domestic buyers. Cheap,
machine-made and mass-produced products entered the Kotagede silver shops and
are there to stay.
However, there were exceptions from which we can draw insights into the role
of networks. One of the businesses in our sample managed to maintain their tra-
ditional silver production as they kept working for the export market due to their
far-flung foreign network. Unquestionably, overseas connections helped to avoid the
economic downturn due to a decline of international tourism. Instead, this business
generated substantial financial resources, particularly through foreign currencies
that were an invaluable asset during the economic crisis. Indeed, the international
antiques market is still particularly interested in authentic Kotagede silver, but only
28 | ASEAS 13(1)
Local Tourism Businesses in Indonesia
a few craftsmen have access to this market (Yuliantoro, ). This particular busi-
ness owner had picked up expertise in promoting and marketing his business beyond
Yogyakarta. Combined with the financial resources and extensive network connec-
tions overseas, this strategy gave this silver producer a competitive advantage over
the majority of other silver businesses in Kotagede. This particular case argues in
favor of the strength of weak ties (Burt, ; Granovetter, ) for access to critical
resources, particularly international trade connections and supply chains.
The third crisis-born business intervention targeted employment arrangements.
As the crisis deepened in the early s, the silver workshops ran out of orders
and employees were, in fact, redundant. Yet, business owners delayed retrenching
their workforce as long as possible. Instead, they left the decision to leave to their
employees. An explanation for this pattern can be found in the embeddedness of
the businesses in the specific social environment, or in the local cultural context and
the norms and values of social connectedness (cf., Hüsken & Koning, ). Despite
the financial problems they experienced, the Kotagede entrepreneurs generally felt
obliged to protect and support their workers, while the workers in their turn also felt
obliged to seek employment elsewhere when the impact of the crisis became intoler-
able. As the majority of the silver producers involved themselves in different kinds of
jobs and trades, while continuing their core businesses during the crises, many crafts-
men and workers were absorbed by informal labor arrangements.
The informalization of labor was reflected in the putting-out system that gained
prominence throughout the decade of crisis. Subcontracting is a flexible industrial
production strategy that enables businesses to reduce labor costs (Leonard, ,
p. ). In Kotagede, the putting-out system absorbed the labor that had become
redundant in the factory-based system, and provided the flexibility required to stay in
business and avoid the loss of skills (Susilowati, ). Retrenched employees of the
silver workshops generally came to serve as subcontractors of their former employ-
ers. This was only possible because both sides had made an investment in their
relationships, as well as in skill development and expertise. As argued by Kloosterman
(, ) and Kloosterman and Rath (), the individual small business owner is
embedded in social networks that provide access to a variety of resources, including
labor. However, the kinds of roles in such networks are shaped by norms and values
and systems of reciprocity and exchange in agreement with the basic societal institu-
tions (cf., Hüsken & Koning, ).
At this interface of the institutional (macro) level and the small business owner
(micro) level, both economic and immaterial benefits surface, such as duty of care,
mutual commitment, and a sense of shared responsibility. In Kotagede’s subcon-
tracting system, the bonds established between employees and their employers were
maintained so that they could activate their relationships when needed. This is remi-
niscent of the debate on the strength and weakness of social ties (Granovetter, ;
Peng & Zhou, ; Stewart, ). The benefits of the subcontracting system for
both employers and employees in times of crisis support the claim that dense net-
works with strong social ties are needed to assure the survival of small firms and
the skill sets developed in a particular industry (Lin, Ensel, & Vaughn, ). Using
this strategy, the employers could at least be assured of the quality of the work pro-
duced. Additionally, they could also flexibly adjust production to demand and thus
ASEAS 13(1) | 29
Heidi Dahles, Titi Susilowati Prabawa, & Juliette Koning
ensure the survival of their businesses. Coupled with the benefits of weak ties for
maintaining successful overseas trade relationships over time, as discussed earlier,
entrepreneurs indeed need both extensive weak ties and strategic strong ones in
order to remain flexible in a rapidly changing market (Peng & Zhou, ; Stewart,
). However, only a few small silver producers in Kotagede were able to do so.
CONCLUSION
The aim of this paper is to come to a better understanding of small tourism-based
enterprises as crisis-resilient pathways to sustainable development. The case of small
businesses in the silver industry in Kotagede is explored during the Indonesian dec-
ade of crisis in order to better understand the ways in which small enterprises cope
with enduring hardship. Between and , the tourism industry had to cope
with declining numbers of international visitors as a consequence of a severe eco-
nomic downturn, terrorist acts, and natural disasters. The mixed-embeddedness
framework applied in the analysis of this case emphasizes that enterprise activity can
be fully grasped and appreciated only through a contextualized understanding.
Consequently, an integrated analytical scheme combines the dimension of
individual business owners and their social embeddedness (networks, norms and
values, firm specific characteristics), the local opportunity structures (changes in
demand), and the macro-institutional context (government policy, economic cli-
mate). The exploration of the coping strategies in the silver craft industry leads us
to conclude that, in the face of enduring crises, many small entrepreneurs perse-
vered and were able to continue their business operations. A full understanding
of the extraordinary resilience of the small silver businesses in Kotagede is offered
when the dynamic interplay of the entrepreneurs’ micro-level embeddedness
in local and family-based networks is coupled with other forces, such as shifting
opportunity structures (meso-level) and an institutional environment (macro-level)
that is conducive to adaptation, such as government measures to stimulate domes-
tic travel and the informalization of labor, offering continuous, additional income
opportunities.
In conclusion, the question that remains is what potential small businesses
offer to become agents of the SDGs? It seems obvious, that among the SDG goals
identified by the United Nations (Verboven & Vanherck, ), those pertaining to
poverty alleviation (SDG) and decent work stand (SDG) out. Not only did many of
the Kotagede silver workshops persevere throughout a decade of crisis, but they also
continued to employ local people and integrate them in the value chain by means
of subcontracting. In doing so, these enterprises engaged in business-driven poverty
alleviation that mitigated the impact of the enduring crisis on the poor. Moreover,
they encouraged entrepreneurship among the workers they had to lay off and helped
establish a home-based industry in areas where these workers lived. In creating this
rural industry, the inequality between the prosperous urban area of Yogyakarta and
its poor rural hinterland was mitigated, which calls to mind SDG, promoting the
reduction of the urban-rural divide (Verboven & Vanherck, ).
However, as our study is limited in scope and scale, future research is needed
to establish the extent to which the subcontracting arrangements actually provide
30 | ASEAS 13(1)
Local Tourism Businesses in Indonesia
adequate livelihoods and contribute to poverty alleviation in the rural hinterland.
More research is needed into the quality of the work, as defined by SDG, since sub-
contracting systems rarely provide benefits beyond a basic income. Moreover, these
systems increase the reliance on unpaid domestic work and increase the burden of
women in particular. This undermines the goals set by SDG that focuses on gender
equality and empowerment of women (Verboven & Vanherck, ).
In Kotagede, the silver businesses fostered the entrepreneurial culture and upheld
the skillsets vital to the industry. These businesses introduced innovations and
sought creative solutions to ongoing challenges. After the earthquake, the surviving
silver workshops substantially contributed to the restoration of traditional build-
ings and the rebuilding of the local community – a community that has been lost to
foreign developers in other parts of Yogyakarta (Dahles & Susilowati, ). In this
respect, these businesses performed a critical role in making the neighborhood ‘resil-
ient and sustainable’, as defined in SDG. However, in the process of surviving the
decade of crisis, the traditional silver industry has been destroyed. It is contentious
whether recent transformations have brought any innovation, as defined in SDG, to
the industry. Efforts to revitalize the traditional craft have so far been left to private
initiatives.
In recognition of the substantial contribution of the small businesses to poverty
alleviation and social cohesion, and their potential to support sustainable develop-
ments in the future, the Indonesian government would be well advised to make
small businesses the centerpiece of their efforts to achieve the SDGs. Bold measures
are called for to mobilize the dormant skills of silver crafting and to recover, for the
benefit of future generations, a traditional industry that is of immeasurable value to
heritage tourism in Yogyakarta.
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ABOUT THE AUTHORS
Heidi Dahles, PhD, is adjunct professor at the Grith Institute for Tourism (GIFT), Grith
University, Brisbane (Australia), and visiting professor at the Cambodia Development Resourc-
es Institute (CDRI). Her research interest is in the interface of development, entrepreneur-
ship, and tourism in Southeast Asia. She published over 40 chapters in edited volumes and
60 articles in peer-reviewed journals such as Annals of Tourism Research, Journal of Sustainable
ASEAS 13(1) | 33
Heidi Dahles, Titi Susilowati Prabawa, & Juliette Koning
Tourism, Asia-Pacific Journal of Tourism Research, Journal of Developmental Entrepreneurship,
Journal of Contemporary Asia. Dahles actively engages with academic journals in the field of
tourism and business as editorial board member and reviewer.
► Contact: heidi.dahles@gmail.com
Titi Susilowati Prabawa is a senior lecturer at the Development Studies Department and the
Dean of Faculty of Interdisciplinary Studies at Universitas Kristen Satya Wacana, Salatiga,
Central Java (Indonesia). She holds a PhD from the Department of Culture, Organisation and
Management (COM) at Vrije Universiteit, Amsterdam. She focuses on qualitative research in
sustainable tourism development, entrepreneurship, small business organization, and liveli-
hood. She has published in international academic journals such as Annals of Tourism Research,
Journal of Small Business & Entrepreneurship, and Asia Pacific Business Review. .
► Contact: titisusilowati@gmail.com
Juliette Koning is professor in Organizational Studies and Director of the Centre for Business,
Society and Global Challenges at Oxford Brookes Business School, Oxford Brookes University
(UK). She holds a PhD in social anthropology from the University of Amsterdam. Her research
focuses on small business organizations in Southeast Asia; the organization of security in
Indonesia and South Africa; and qualitative research, particularly ethnography and creative
approaches. Her work has been published in such journals such as Entrepreneurship, Theory &
Practice; Organization Studies; Entrepreneurship & Regional Development. She recently co-edited
New Religiosities, Modern Capitalism and Moral Complexities in Southeast Asia (Palgrave).
► Contact: j.koning@brookes.ac.uk
34 | ASEAS 13(1)
