Internal factors improving viability of small food and beverage businesses: The case of Indonesia

Abstract

Small food and beverage business is considered highly contributing to the economy as it has a close linkage with local micro and small businesses, both upstream and downstream. However, this business group faces challenges; many of them are unable to survive, grow, and compete with large ones. This study is intended to analyze internal factors affecting the performance of small food and beverage businesses in Indonesia. With the use of 100 samples of small businesses, the study applied OLS multiple regression to examine the four internal factors, which are entrepreneurial characteristics, marketing strategies, business capital, and innovation activity. The study results show that marketing strategies, business capital, and innovation activities have a positive and significant effect on the performance of small food and beverage businesses. These findings indicate that small businesses depend mostly on those three factors with different levels of intensity for different business locations. Businesses located in universities and hospital areas are likely to have low intensity compared to those located in office areas or crowded places. Differently, entrepreneurial characteristics do not affect performance. Likely, small entrepreneurs did not have a strong business interest, still expecting to work in government organizations and companies. They established a business due to family encouragement and economic needs. AcknowledgmentThe study on the small businesses in food and beverage sector is part of a research grant project from Hasanuddin University conducted by LP2M (Institute for Research and Community Services Institute of Hasanuddin University). In carrying out this study, the involvement of a number of agencies cannot be ignored: Cooperatives and Small and Medium Size Regional Office of South Sulawesi Province and Cooperatives and Small and Medium Size Regional Office of Makassar City.