Innovation diffusion of producer institution to achieve better equity in furniture industry in Indonesia

Furniture is a culturally rooted industry in Indonesia, where millions of people depend on it. The district of Jepara, Central Java is the center of furniture and carving activities in Indonesia. In many developing countries, the furniture industry is dominated by small-scale enterprises and is buyer driven. Small-scale enterprises adapt their processes and products to follow buyer's demand. Otherwise, they will not survive in the fierce market competition. An individual small-scale producer has low bargaining power against brokers and end buyers in selling their products. An effort to strengthen small-scale producers of furniture in Jepara, Indonesia has been facilitated by the establishment of the Jepara Furniture Small-scale Enterprise Association (APKJ) in 2009. APKJ is an institutional innovation which has organization, rules and activities. The APKJ innovation is attributed by relative advantages, compatibility, complexity, trialability and observability. This paper describes how APKJ diffuses to 12 thousand business units through chains of innovators, early adopters, early majority, late majority and laggards. A spatially explicit agent based modeling (ABM) was used to simulate the diffusion of APKJ innovation. The results show an S-curve of innovation diffusion. The theory of complexity as well ABM were useful in understanding common property. Although the model is specific to the Jepara furniture industry, its lessons and conceptual model can be implemented in other parts of the world.

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