Entrepreneurship Innovation and Their Problems: A Case Study on MSME Entrepreneurs in Blitar City Indonesia

Siti Sunrowiyati1, Sandi Eka Suprajang2, Ma’rifatul Hidayah3, Imam Turmudzi4

1,2,4 STIE Kesuma Negara Blitar

3Dinas Pendidikan Tulungagung

• RESEARCH CONTEXT

Population growth in Blitar City is very rapid, demanding the government to provide jobs, BPS statistical data in 2020 the population in Blitar City is 149,149 people, various methods have been carried out by the local government but have not been able to compensate for providing jobs.  So that the mindset of the people in Blitar City must be changed so that they are no longer job seekers, but participate in becoming job providers both for themselves, their families and the wider community in Blitar City.  One way is to make a leap, namely the need for entrepreneurial innovation, which is a solution to national independence. The number of entrepreneurs in Blitar City is still very low compared to cities around Blitar, economic growth in Blitar City is still very slow.

Therefore, the younger generation of Blitar City must develop the entrepreneurial sector to encourage and develop entrepreneurial  innovation,  the  number of entrepreneurs in

Corresponding Author: Siti Sunrowiyati

*Cite this Article: Siti Sunrowiyati, Sandi Eka Suprajang, Ma’rifatul Hidayah, Imam Turmudzi (2021). Entrepreneurship Innovation and Their Problems: A Case Study on MSME Entrepreneurs in Blitar City Indonesia. International Journal of Social Science and Education Research Studies, 1(1), 25-31

in Blitar City can increase so that they can actively participate in supporting the economy towards national independence, the number of entrepreneurs in Blitar City still needs to be increased so that it requires contemporary innovation to  creating jobs for the growth of the number of medium-sized businesses needs to be supported by educational institutions including training held by various agencies, the training that has been carried out by the Blitar city government is very supportive to print the millennial generation for entrepreneurship, entrepreneurial activities will arouse enthusiasm or economic stretching so that the city of Blitar  will be able to make an independent city able to create its citizens create jobs, entrepreneurial courage is still very rarely done by beginners because of limited funds and knowledge so it is very difficult to  create job opportunities.

Entrepreneurial innovation is a tool of entrepreneurs taking advantage of change as an opportunity for a different business or service.  There is a lot of overlap between entrepreneurship and innovation (Schumpeter, 1934). According to Johnson 2001, entrepreneurship in a narrow sense includes capturing ideas and opportunities to turn them into products or services and building businesses to create independence. According to Zimmerer 2008, entrepreneurship has several benefits including providing opportunities for oneself, secondly, the opportunity to make changes, creating opportunities to achieve their own potential, four opportunities for profit, five having opportunities to play an active role in society, getting recognition for their efforts for something.  what she likes. Business or business is one of the human efforts in getting income to achieve success in life in the world and the hereafter and business if it is carried out correctly and seriously will get something that does not betray the results.

Basically every human being has their own skills as a gift given by God to man but this is not many people who realize that he has the potential to be honed by science so that the potential can not appear, this is what makes the area, especially Blitar city often may conduct training devoted to the younger generation to be able to prospective entrepreneurs in the city of Blitar.

Entrepreneurial innovation in the city of Blitar is a combination of novelty and effort, because businesses that do not follow the trend of the times will be abandoned by consumers of novelty that arises through innovation is very necessary and this research emphasizes the combination of innovation and entrepreneurship and the problem in the city of Blitar which eventually later the people of Blitar city make as a successful beginner entrepreneur area.

Entrepreneurial innovation is focused on new products, new production methods open New Market looking for new sources of supply and organizing management’s newness. Therefore in this research entrepreneurial innovation is a value-added process and a new level of novelty for prospective entrepreneurs who develop procedures from difficult problems to create new products and services.

• LITERATURE REVIEW 

The term entrepreneur comes from the French word “entreprendre” meaning “run” (Kuratko and Hodgetts, 1998). Entrepreneurship is an entrepreneurial spirit built on the development of knowledge between science and marketing (Hisrich et al., 2005), while Cantillon emphasized that an entrepreneur is a risk taker by looking at his behavior, namely buying at a fixed price but selling at an uncertain price.  This uncertainty is called risk (Hisrich et al. 2005). Cantillon’s opinion combines entrepreneurial activities with entrepreneurial characters who dare to take risks. Similar opinions confirmed by Kao (1989), which interprets entrepreneurship as an activity to speculate and take risks.

Based on the above understanding, the difference is that entrepreneurship is more related to the soul, entrepreneurs relate to people, and entrepreneurship is related to activities. Using Hisrich’s opinion, the entrepreneurial spirit in question is closer to the psychological traits or characteristics that entrepreneurs must have.

Innovation is a term first introduced by Schumpeter in 1934. Innovation is seen as creating and implementing new combinations. This new combination term may refer to new products, services, work processes, markets, guidelines and systems. New term described by Adair (1996) by no means original, but new. The importance of this novelty is made clear by Schumpeter’s opinion that innovation creates and implements something in combination. Through innovation, products, services, work processes, marketing, delivery systems and guidelines can be improved not only for the company but also for shareholders and the public (de Jong &Den Hartog, 2003).

The purpose of innovation is to add value to a product or service (William, 1999) economic and social benefits (Brazeal and Herbert, 1997). If it is economically related, it is referred to as business innovation, which tries to commercialize new ideas and/or inventions, products, designs, and resources. Instead known as social innovation, the use of this invention is more for the benefit of the wider community. Byrd & Brown (2003) says that innovation is based on two dimensions, creativity and risk-taking. Similarly, the opinion of Amabile et al. (De Jong & Kamp, 2003) that all innovations start with creative ideas. In addition to creative ideas, Janssen (2003) said that innovation consists of two other aspects of behavior in promoting ideas and implementing ideas.

Innovation in broad concepts is not only limited to products. Innovation can be an idea, a path, or an object that a person feels is new. Innovation is also often used to refer to the changes experienced by people who experience it as novelty. However, in the context of marketing and consumer behavior, innovation is associated with new products or services. New to products that have never been on the market and new in the sense that there are several different things that are improvements or improvements to previous products that consumers have known in the market. 

The role of innovation in product and service development Innovation plays an important role in the development of entrepreneurial products and services.  Various entrepreneurial successes in the world are due to creativity in product development.  Intense competition in the field of entrepreneurship encourages entrepreneurs to be very creative.  Creativity must be based on forward thinking, new ideas that are different from existing products.  In general, creative ideas cannot be limited by space, form or time and offer new breakthroughs in the business world that initially seemed impossible.

 Various innovations based on entrepreneurial creativity are now becoming superior products and services.  Entrepreneurship through creative and innovative processes creates added value for goods and services, which then creates various advantages including competitive advantages.  Companies like Microsoft, Sony and Toyota Motor are examples of companies that are successful with their products because they have creativity and innovation in technology.

 Personal characteristics that are firmly entrenched in true entrepreneurs are creative and innovative.  Companies that are not based on creative and innovative efforts usually cannot thrive forever.  In a dynamic business environment, entrepreneurs must always be able to adapt and look for the latest innovations. 

• RESEARCH METHODS

Based on inductive logic, this approach is qualitative due to its effectiveness in the context of exploratory research (Charreire and Durieux (1999). The data collection methods used in our study are based on semi-structured interviews where researchers use the interview guide attached.

Thus, semi-structured interviews were conducted to examine the opinions of MSME leaders about entrepreneurship and innovation and their problems.  Semi-structured interviews with the leaders of each MSME were conducted and the conversations were recorded and then transcribed.  The next step after conducting the interview is selecting, sorting, and processing the data in the transcript.  In this process the researcher decides what data should be extracted from the coded text (Bardin, 1996).

For the data processing part, it is carried out using content analysis described by Voynnet Fourboul (2004). That is, after each interview, the researcher can directly extract the meaning conveyed from the transcript of the conversation with the interviewee.  On the basis of these interviews, the responses of interviewees tend to lead to the general opinion that entrepreneurship and innovation are closely related. 

Entrepreneurial innovation is used interchangeably by MSME leaders in describing perceptions of how businesses are created or how businesses achieve competitive advantage.  Regardless of size, any industry or business sector must create new products and services, new business opportunities, and markets to be able to create new businesses.  So that MSME leaders can integrate innovation into entrepreneurial approaches and actions.

 In this study, nine semi-structured interviews were conducted to test whether there is a relationship between entrepreneurship and innovation.  Nine MSMEs in the city of Blitar include:

1. MSMEs must be actively involved in entrepreneurship and innovation activities;  and
2. MSMEs must be of different sizes, in different industrial sectors, and of different ages (year of establishment).  Among the types of business are as in the table below:
   

Table I. MSMEs interviewed

Semi-structured interviews with the leaders of each MSME were conducted and the conversations were recorded and then transcribed.  The next step after conducting the interview is selecting, sorting, and processing the data in the transcript.  In this process the researcher decides what data to extract from text to code.

For the data processing section, it was carried out using content analysis of the answers from the informants and after each interview, it was immediately possible to extract the meaning conveyed from the transcript of the conversation with the interviewee.

• DISCUSSION AND RESULTS

Perceptions of entrepreneurship and innovation behavior in Table II below summarize the responses and answers obtained from the interviews.

Table II. Leaders’ perceptions of innovation and entrepreneurial behavior

On the basis of this interview, the responses of the MSME leaders interviewed tend to lead to a general knowledge that entrepreneurship and innovation are closely related.  Indeed, the two words are used interchangeably by MSME leaders to describe their perception of how their business was created or how they achieved an advantage over their competitors.  Regardless of size, industry or sector, MSMEs in the city of Blitar must create new products and services, projects, new business opportunities, and markets to grow big or survive in the midst of onslaught.  The provisional conclusion is that all MSME leaders integrate innovation into entrepreneurial approaches and actions.

1. The results of this study produce 4 propositions 
2. First, because all companies in the city of Blitar must create and find new markets with new products or services, new ways of doing business, and new management strategies.  The findings of this study support Schumpeter’s (1934) paradigm that entrepreneurial innovation creates and implements something in combination.
3. The second proposition is also confirmed in this study.  Innovation is seen as a process that is not limited to the creation stage but is more likely to continue to be created without stopping. The continuous development of innovation underpinning the growth of the nine companies studied in the city of Blitar seems to rely on a similar entrepreneurial approach/attitude to innovation.  In an entrepreneurial perspective, they continue to seek and create opportunities, thereby stimulating the generation of innovation (Drucker, 1994).

According to the MSME leadership, the key to its success is its uniqueness and creativity in providing products and services that are highly tailored to customers.  To do so, several research sites in the company’s MSMEs have developed a strong culture of innovation.  Being unique and creative eventually becomes the main criteria for employee recruitment and motivation.  The same vision was adopted by other MSMEs.  “Innovation is seen as everyone’s responsibility and as a source of job satisfaction for every employee”.  In order to win bigger contracts and new customers, MSMEs are trying to explore new ways and different approaches to “doing things that no one else is doing. These examples show that entrepreneurship and innovation are ongoing processes within a business, and that entrepreneurship and innovation complement each other in improving business performance.

1. Proposition 3, the problem of the level of thinking and knowledge of innovation is always ambiguous.  National understanding and MSMEs have a big influence on the level of entrepreneurship and innovation in a business.  Knowledge is a key determinant of entrepreneurship and innovation.  Entrepreneurial knowledge also has an important impact on entrepreneurship and innovation (Slevin and Covin, 1990). 
2. Proposition 4 Organizational culture can influence the level of entrepreneurship and innovation through a socialization process that influences behavior in the workplace, and through structures, policies, and procedures shaped by the basic values and beliefs of the organization (Martin and Terblanche, 2003). 

See how MSME companies in the city of Blitar have developed an organizational culture that promotes and values ​​new ideas and new ways of doing business.  Many elements of the hierarchy and structure of organizational management and how they affect innovation can be studied.  Nevertheless, the responses of the interviewees showed clearly that there is indeed a culture of innovation in their organization.  All MSME companies in the city of Blitar are involved in innovative efforts, allocate resources for innovation, and share the same strategic vision with respect to innovation and entrepreneurship.  They also share an open attitude regarding new ideas and new ventures.  This finding is similar to that of Roberts et al. who explored the relationship between organizational size, technology implementation, and organizational culture through a survey of 35 American and Canadian manufacturing companies.  They point out that there are many similarities in the area of ​​technology implementation between large and small businesses, and between hierarchical and non-hierarchical organizations..

1. Problems and barriers to innovation in entrepreneurship in the city of Blitar

The context of MSME companies in the city of Blitar seems to present many obstacles for managers who are involved in entrepreneurship and innovation.  The main problems expressed by some of the company leaders in this study can be stated as follows:

a). None of the nine companies have a formal specific structure that applies to the application of innovation and entrepreneurship, and no one assigns the position of innovation manager or entrepreneurship manager, or internal innovation function within the company. The company’s leadership response shows that, nowadays, the innovation and entrepreneurship system is very informal in its organization.

b). Sometimes innovation is not well received by consumers. customers are sometimes reticent to new ideas and stuck to the same old ideas.

c). Innovation would not have worked without suitable habits. Because employees do not yet have a culture of appropriate innovation, such as education and training to be creative, take initiative and propose new ideas.

d). Lack of Government support. Many company leaders find it difficult to innovate because there is no help from the government to encourage companies to think of creating something new or something different. 

e). There is no innovation culture that encourages MSMEs in Blitar to go further in the future. 

f). Can’t measure the results of innovation and entrepreneurship in the company because it is very difficult to separate from the overall business of the organization.

g). Underfunded. As one leader put it: “It’s hard for a small company like ours to be innovative in product development because of the lack of capital needed to promote products”.

h). Company leaders are less willing to take risks.  As one of the company leaders interviewed said that they felt a slight fear of making a misstep if they were too creative, and this could hinder the development of innovation.

1. CONCLUSION 

From the discussion about the innovation of MSME companies in the city of Blitar, several conclusions can be drawn including:

1. Innovation and entrepreneurship are complementary because innovation is the source of entrepreneurship and entrepreneurship allows innovation to thrive and helps to realize its economic value.
2. Entrepreneurship uses innovation to expand business scope and drive growth.  Therefore, entrepreneurship and innovation are dynamic processes that are not limited to the initial stages of a new venture.
3. Entrepreneurial development through innovation and creativity can lead to successful commercialization and only requires an organizational culture and management style that focuses on supportive innovation.

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