1

Effectiveness of Small Enterprise Empowerment Policy

In Jayapura City
ABSTRACT

The existence of small-scale enterprises is an integral part of the national business that has the
position, potential and a very strategic role in realizing the goals of national development.Preparatory
government to help small entrepreneurs in the form of actions of small business empowerment
programs that are national economic actors at the downward level, very basic for attention attention.
But this matter still can not be developed again, this matter can be seen from data which have
experienced before that still many small business actors have not able to develop business activity
which big and big.
The purpose of this research is (i) to know the effectiveness level of small business
empowerment program by improving the performance of small-scale business in Jayapura city; (ii) to
know the effective role of the empowerment program; and (iii) to determine the effective role of the
business empowerment program. The research was conducted with a quantitative approach involving
100 small business actors in Jayapura city. Sampling is done proportionally random sampling.
Modeling the relationship between variables studied by using partial least square model (PLS) with
SmartPLS software.
The results of the study provide some results from the existing hypothesis model. Highly
effective small business empowerment program policies will increase entrepreneurship competence.
Furthermore, the competence of entrepreneurship is stronger while carrying the program of effective
small business empowerment will improve the performance of small business. Effective small business
empowerment program policies certified for entrepreneurship, and entrepreneurial personalities
contribute dominantly to small business performance. Specific performance in sales and labor growth.
Keywords: policy effectiveness, entrepreneurial competence, small business performance

Background

Development is nothing but a conscious, planned and sustainable process of change with the
main objective being to improve the welfare of a people's life or society. This means that development
always departs from a state or condition of life that is not good to a better life in order to achieve the
national development goals of a nation.
Development efforts undertaken so far with various policies run by the government, especially
in the field of economic development with the aim of improving the welfare of the community. As
mandated in the 1945 Constitution, article 33, paragraph 4, it is explained that the national economy is
organized based on economic democracy with the principle of togetherness, fair efficiency,
sustainable, environmentally friendly, independence, and by maintaining the balance of progress and
national economic unity. Further reinforced in one of the mission of Indonesia's future is the
implementation of community empowerment and all national economic power, especially small,
medium and cooperative entrepreneurs by developing a populist economic system based on fair market
mechanism based on natural resources and human resources are productive, independent, advanced,
competitive, environmentally friendly, and sustainable.
The existence of small business is an integral part of the national business world that has a
position, potential and a very strategic role in realizing the goals of national development. Given its
role in development, small businesses must continue to be developed with the spirit of kinship as the
backbone of the national economy and most Indonesians live and rely on the small business sector
(Hafsah, 2004). Therefore, the government is obliged to direct, guide, protect, and cultivate the
business so that the spirit of community entrepreneurship can be more motivated and motivated to run
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their business activities. In addition to small business play a role in economic growth and employment
absorption also play a role in the distribution of development results. In the economic crisis that
occurred in our country since some time ago, where many large-scale business that stagnated and even
stopped its activities, small business sector proved more resilient in the face of the crisis.
Based on the experience of other countries in empowering their small businesses, it is built
through a powerful organizational platform to provide protection in order to remain a business that
sustains national business continuity. For example, in Japan known as the "Federation Of Credit
Guarantee" was built in 1952, with the aim to provide financial guarantees for small businesses. In
Indonesia is also known for various small business development programs such as credit programs
such as Small Investment Credit, Permanent Working Capital Credit, Small Business Loans, Credit
Feasibility is intended to increase production access and capital turnover for small businesses. Also
developed a pattern development program that is the mainstay of the New Order Government's
flagship program in developing small businesses.
The government's support for small entrepreneurs in the form of small-scale empowerment
program actions that constitute the majority of national economic actors at the lower and middle levels
is fundamental to get serious attention from the government. One of the priority programs of the
United Indonesia Cabinet is the development of small businesses that have been formalized in
Government Regulation No. 7/2005 on the National Medium Term Development Plan (RPJM) Year
2004-2009 on Cooperatives and Micro Small and Medium Enterprises (KUMKM) which is believed to
be able to be dynamicator and buffer for the national economy. This is based on two reasons. First,
quantitatively the number of small businesses is large enough, the majority of which directly serve the
daily needs of the wider community. Secondly, the total assets of small-scale enterprises have
significant contribution and potential to the national economy (Tambunan, 2000)
In the context of small business empowerment, Jayapura City Government in this case the
Department of Industry and Trade and Cooperatives through Regional Regulation No. 6 of 2008 which
regulates the Organization of Working Procedures Local Government of Jayapura City including the
empowerment program by the Department of Industry and Trade and Cooperatives. is at the level of
operational level. Small business empowerment policies that are actualized in the form of programs
based on local regulations that are: 1) business climate growth, 2) partnership, 3) business
development and development) and entrepreneurship spirit development.
Small business empowerment policies that have been implemented by the government in
entrepreneurs engaged in small business, of course can be seen from the program results based on
policy evaluation through a process to see how successful a program. If a small entrepreneur can feel
the impact of a well-received policy, then the policy can be considered effective, as Muhadjir pointed
out in Widodo (2008: 119). That evaluation of public policy is a process to assess how far a public
policy can work. The success of a policy in which there are two concepts of effectiveness and
efficiency. Effectiveness is the ratio between output and input whereas efficiency is the level of input
utilization to produce output through a process (Peter 1985).
Dunn (2000) explains that the Evaluation in the policy leads to value, whether it concerns the
product, the value information or the benefit of the policy result. Furthermore Dunn explained that one
of the criteria of policy evaluation is the effectiveness of achieving the desired result in each policy. To
evaluate the achievement of the result or the benefit of the policy of small business empowerment
program which has been implemented by Jayapura City Government is to see the business
development through the performance of the small entrepreneurs both from the side of business
growth, business income, and also seen from the satisfaction of the small entrepreneurs on the policy
of business empowerment program small ones that have been run by the government. This is in line
with the opinion of Cambell in Steers (1985) that to measure effectiveness in business organizations
can be seen several criteria in the measurement of effectiveness, among others; business growth,
earnings, and job satisfaction. Effectiveness is the main criterion for achieving goals in the framework
of small business empowerment, as Bernard (in Dalimunthe, 2003) suggests that effectiveness is an
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action where it will be effective if it has achieved its intended purpose. While Anoraga (2000) states
that the effectiveness associated with achieving goals more associated with the work. In general,
effectiveness provides limits in terms of results achieved without regard to resources used in the
organization. In other words that effectiveness is the ability to choose the right goal or the right
direction in achieving the goal.
Small business empowerment programs that have been described earlier if implemented
properly, then the impact felt by small entrepreneurs in developing their uahanya will develop, as
explained by Kumoroto (2008) in his research that the small business empowerment program can be
more effective when the government has responsiveness businessman engaged in business. However,
Kumorotomo explains that small-scale entrepreneurs often still face obstacles due to conflicts of
interest among stakeholders in the region and due to the determination of development priorities in
areas that are less favorable to small business empowerment. During this time, small businesses as
business institutions that are scaled and underdeveloped and receive only programs that are simply
programs without effort to improve the independence and maturity of small business actors.
Several other research results suggest that the incapability of small entrepreneurs to expand
their business into medium or large enterprises due to internal and external factors.Tambunan (2003)
explains that one of the internal factors that affect the development of small business is the issue of
entrepreneurial competence is low quality human Resources. HR is an obstacle in developing a
business, especially in aspects of entrepreneurship, weak in the field of administration and business
management, rarely basing themselves on a systematic plan because it is less able to pour their
thoughts about the importance of business plans, entrepreneurial competence, , work ethic and
character of the entrepreneur itself. Even the majority of small businesses grow traditionally and is a
family business that hereditary. Limitations of the quality of human resources of small businesses both
in terms of formal education and knowledge and skills that have a very influential on the performance
of small businesses, making it difficult to develop optimally. Other internal factors are lack of access
to capital financing required to develop a business unit. Lack of capital of small-scale enterprises, since
in general small and medium-sized businesses are private or closed businesses, which rely on the
capital of the owner, whose numbers are very limited, while loan capital from banks or other financial
institutions is difficult to obtain due to administrative and technical requirements requested by the bank
can not be fulfilled.
The requirement that becomes the biggest obstacle for small business is the provision of
collateral because not all small businesses have sufficient assets and enough to be used as collateral.
Related to this, small businesses also encounter difficulties in terms of access to financing sources. So
far, familiar enough with small business is the financing mechanism provided by the bank where
required by grace. Against other access financing such as investment, most of them do not have access
to it.
Accessing business credit from banking institutions and other financial institutions that should
be obtained easily through banking access, but the obstacles it faces are; the low or limited access of
small businesses to various information about the service of financial facilities provided by formal
financial institutions, whether banks or non-banks such as SOE funds, procedures and banking
requirements are too complicated so that the loans obtained are not as good as the amount or time,
most banks still place material collateral as one of the requirements and tend to override business
feasibility; the interest rate charged is still high; lack of coaching, especially in financial management,
such as financial planning, proposal preparation and so forth. These conditions resulted in small
businesses still unable to reach various credit schemes provided by the government.
Limited facilities and infrastructure, namely the lack of information related to the progress of
science and technology, causing their facilities and infrastructure is also not fast growing and less
support the progress of business as expected. In addition, not infrequently small businesses difficulty
in obtaining a strategic place due to the high price of rent. Limited access for small businesses in
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access to information, has little to do with the competition of products or services from small business
units with other products of quality.

LITERATURE REVIEW

1. Effectiveness of Public Policy

The term policy in English policy is distinguished from the word wisdom which means wisdom
or wisdom. Policy is a general statement of behavior rather than an organization. In the opinion of
Alfonsus (in Sirait, 1991) defines policy, as a guideline for decision-making. Policy is something that
is useful and also a simplification of the system that can help and reduce problems and a series of
actions to solve a particular problem, therefore a policy is considered very important. While Dunn
(2003). calling the term public policy a complex dependency pattern of interdependent collective
choices, including decisions for inaction, made by agencies or between governments "
Public policy as proposed by Dunn suggests the existence of collective choices that depend on
each other, in which the decisions to take action. The public policy in question is made by a
government agency or office. A policy once it has been established, it must be implemented to be
implemented by administrative units mobilizing financial and human resources, and evaluated in order
to serve as a monitoring mechanism against the policy in accordance with the policy objectives
themselves.
Sharkansky (in Widodo, 2001) put forward public policy is "What government say and do, or
not to do, it is the goals or purpose of government programs. (what it says and does, or does not do.)
Policy is a set of goals and objectives of government programs). Sharkansky's opinion suggests what is
done or not done. This is related to the goals and objectives contained in the programs that have been
made by the government.Budiardjo (2000) suggests the definition of policy (policy) is a collection of
decisions taken by a perpetrator or by political groups in an effort to choose the goals and ways- how
to achieve it. Laswell (in Syafie, 1992), explains that policy is the intellectual task of decision-making
including explanation of goals, trending decomposition, state analysis, future development projections
and research, assessment and research, and the assessment and selection of possibilities.
In Laswell's opinion, that policy is defined as the intellectual task of decision making which
includes various explanations of the objectives to be achieved from a policy that has been made, the
decomposition of the tendency to choose some objectives that fit the circumstances, the development
of impact and the performance of the policy in the future , and conduct research and evaluation. Easton
(in Muchsin and Fadillah, 2002) defines public policy as a process of forcibly allocating values to
entire societies perpetrated by authorized institutions such as government. Public policy can be said to
have a potentially legitimate "coercion" nature. The nature of this force is not shared by the policies
adopted by private organizations. This means that public policy demands wide adherence from society.
It is this nature that distinguishes public policy by other policies. This understanding, in a general
policy must be legalized in the form of law, in the form of a Government Regulation. Therefore, a
policy process in the absence of legalization of the law would be very weak dimensions of the
operationalization of public policy. It is important to note that public policy is not the same as the law,
although in practical terms on the ground both are difficult to separate. Based on the above
understanding, it can be concluded that the policy is a collection of decisions. The decision is taken by
an actor or by a political group that is the government. The decision seeks to choose the goals and
means to achieve the goals to be achieved.

2. Small Business Empowerment

Empowerment as a process requires the development of a state that is not or less powerless to
have the power to achieve a better life. To improve the capacity of the community to be able to transfer
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power is to increase education and awareness strategies. In order for the empowerment process in
accordance with its objectives, Adi (2001) said the need for social intervention is spelled out through
two interventions namely macro internesi that is intervention done at community and organization
level while intervention micro is an intervention done at the individual, family and group level. In its
application in the field Adi (2001) states there are 2 (two) approaches that can be done. The directive
approach is based on the assumption that the community worker knows what is needed and what is
good for the community, while the non-directive approach is based on the assumption that people
know what they really need and are good for them. Based on the above description, it can be said that
the empowerment process should be able to transfer the power by improving the capacity of small
entrepreneurs in a sustainable manner in improving the ability and ability to develop their business in
an effort to improve the welfare and standard of living of small entrepreneurs.
Small business empowerment refers to the word empowerment, that is as an effort to actualize
the potential already owned by small groups of entrepreneurs. The small business empowerment
approach focused on self-employed entrepreneurs as a system that organizes themselves so that it is
expected to play a role for the individual rather than just an object, but rather as the subject of
economic development actors that contribute to the future and public life in general. Small business
empowerment is an effort to provide motivation / encouragement to entrepreneurs so that they have the
awareness and ability to decide for themselves what they should do to overcome the problems they
face. In this case, small entrepreneurs are in a powerless position. Such a position gives more space to
abuse of power which implies the deterioration of their business field. Thus, small entrepreneurs must
be empowered to have the power of bargaining position (empowerment of the powerless). In essence,
empowerment does not make the object of empowerment more and more dependent on the programs
of giving (charity) .Because the ultimate goal is to establish them, and build the ability to advance
themselves towards a better life on an ongoing basis.
The involvement of empowered small entrepreneurs is so important that the goal of
empowerment can be maximally achieved. Programs involving small businesses have several
objectives, namely that they are effective as they wish and recognize their abilities and needs, and
enhance the empowerment of small businesses with experience designing, implementing and
accounting for self-improvement and economic efforts. Small business empowerment based on Law
Number 20 Year 2008 regarding small business explicitly states the purpose of empowering small-
scale enterprises are: (1) growing and improving the capability of small-scale enterprises into a strong
and independent business and can develop into medium-sized enterprises, and (2) increase the role of
small enterprises in the formation of national products, the expansion of employment and business
opportunities, the increase of exports, as well as the increase and distribution of income to manifest
itself as the backbone and strengthen the structure of the national economy.

3. Entrepreneurship Competencies

Successful entrepreneurs in general are those who have the competence of: someone who has
the knowledge, skills and quality of the individual that includes attitudes, motivations, values and
behavior necessary to carry out the work / activities. Based on the urain of some opinions that have
been described previously, it can be concluded that the entrepreneurial competencies that must be
owned by a businessman are as follows:

a. Managerial skill
Managerial skill or managerial skill is a provision that must be owned by an entrepreneur.
Entrepreneurs must be able to carry out the functions of planning, organizing, implementation and
supervision so that the business they run can achieve the goals and targets set.Kemampuan identify
and seize opportunities, the ability to manage human resources , materials, finances, facilities and all
the resources of the company is an absolute requirement to become a successful entrepreneur. In
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outline there are two ways to grow managerial skills, namely through formal and informal channels.
Formal pathways such as through the level of vocational secondary school business and management
institutions or through higher education .. Informal line, for example through seminars, training and
self-taught and through experience.

b. Conceptual skill
The ability to create business planning, formulate goals, policies and business strategies is the
cornerstone to successful entrepreneurship. It is not easy to have this ability. We have to learn and
practice from many sources and continue to learn from our own experiences and experiences in
entrepreneurship.

c. Human skill
Understanding, understanding, communicating and relating, sociable, sociable, sympathetic and
empathetic to other people is a skill capital that is very supportive to the success of the business. With
these skills, we will have many opportunities in pioneering and developing business. Efforts that can
be made to improve this ability for example by training ourselves in various organizations, joining
hobby clubs and train our personality to behave soothing for others

d. Decision making skill

Skills formulate problems and take decisions. As an entrepreneur, we are often faced with
uncertainty conditions. Various problems usually appear in situations such as this. Entrepreneurship is
required to be able to analyze the situation and formulate various problems to find various alternative
solutions.Not easy do choose the best alternative from the various alternatives that exist.In order not
wrong to determine an alternative, before making a decision, the entrepreneur must be able to manage
the information as a basis for decision making. Deciding skills can be learned and we wake up in
different ways. In addition to formal education, informal education through training, simulation and
sharing of experience can be obtained.

e. Time managerial skill

Skills set and use time. Psychologists say that one cause or source of stress is one's inability to
manage time and work. The inability to manage the time to make the work becomes stacked or never
completed so as to make his soul upset and not calm. An entrepreneur must continue to learn to
manage time. Time management skills can facilitate the implementation of work and plans that have
been outlined.

The role of entrepreneurship in building economic growth should be supported by the ability of
entrepreneurs based on entrepreneurial competence. Schumpeter, Kirzner & Knigth (1999) suggests
three prominent roles of an entrepreneur: first, as an innovator; secondly, as individuals seeking
profitable opportunities; third, likes the risks to be considered. These three roles must be supported by
entrepreneurial competence related to knowledge, skills or abilities sufficient to meet a need such as
effective performance. Baum, (2001) defines individual competencies as individual characteristics
such as the knowledge, skills and abilities required to run a certain business activity.Crawford &
Turner (1995) in Brazell, Devinney, & Midgley (1998) argue that the concept of competence as "a
combination of knowledge, skills, and behavior that is widely diffused throughout the organization and
its people and embedded in the system , processes and structures.
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4. Small Business Performance

Performance or performance is the work that can be achieved by a person or group of people
within the organization, in accordance with their respective powers and responsibilities in order to
achieve organizational goals (Suyudi, 1999). If the individual performance is good, then most likely
the performance of the company or organization will be good. According to Levbinson (1979)
Performance or performance is the achievement or achievement of a person with regard to the tasks
assigned to him. According to Rivai (2005) performance is the result or success rate of a person as a
whole during a certain period in carrying out the task compared with various possibilities, such as
standards of work, targets or targets or predetermined and agreed upon criteria. Performance is a set of
results achieved and refers to the action of achieving and performing the work requested (Stolovitch
and Keeps, 1992). Performance is one of the total aggregates of labor available to workers (Griffin,
1987). Performance is influenced by goals (Mondy, Noe, and Premeaux: 1993). Performance is
declared good and successful if the desired goals can be achieved well (Donnelly, Gibson and
Ivancevich, 1994). Performance as an interaction function between ability or ability (A), motivation or
motivation (M) and opportunity (O), ie performance = (A x M x O). Meaning: performance is a
function of ability, motivation and opportunity (Robbins: 1996).
Thus performance is determined by factors of ability, motivation and opportunity. Performance
opportunities are high levels of performance that are partly a function of the absence of obstacles that
drive the employee. Although an individual may be willing and able, there may be obstacles which is
an obstacle. Related to that, performance is the willingness of a person or group of people to do
something activity and perfect it in accordance with its responsibilities with the expected results. If it is
associated with performance as a noun in which one of its entries is the result of a thing done, the
notion of performance or performance is the work achieved by one person or group of persons within a
company in accordance with their respective powers and responsibilities - in efforts to achieve the
objectives of the company legally.
Performance in performing its function does not stand alone, but relates to job satisfaction and
reward levels, influenced by the skills, abilities and individual traits. Therefore, according to the
partner-lawyer model (Donnelly, Gibson and Invancevich: 1994), individual performance is
fundamentally influenced by factors: (a) expectations of reward, (b) drive, (c) ability; (e) internal and
external rewards, (f) perceptions of the level of rewards and job satisfaction. Thus, performance is
essentially determined by three things: (1) ability, (2) desire and (3) environment. Therefore, in order
to have a good performance, a person must have a high desire to work and know his work. Without
knowing these three factors a good performance will not be achieved. In other words, individual
performance can be improved if there is a match between work and ability. Individual performance is
influenced by job satisfaction.
Many give the limits to the success of the business, according to Meclelland, an entrepreneur
who is considered successful if able to survive and achieve goals in the field of business already. In
this case means those who are not Meclelland (1967). How long a small business can survive is said to
be successful, Bygrave ( 1996) declared the worst after being able to pass the 7th year, the business
was only able to survive and the chances of developing opportunities big enough. This border still has
a weakness that is less attention kemanpuan developing. Many small industries that can survive for
decades, but the business conditions remain as when the beginning of the business in such stagnant
conditions can be categorized successfully.
According to Simamora (1997) the critical factor with regard to the long-term success of an
organization is its ability to measure how well employees are wealthy and use that information to
ensure that implementation meets current standards and improves over time. Performance appraisal is
a useful tool not only to evaluate employee work, but also to develop and motivate employees.
Measuring the success of the effort effort is easy, the traditional success of the business is
measured financially. For a long period of time, the method of measuring business success focused on
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acceptable financial measures (Kaplan and Norton 1992). But in the mid-decade of 1990s the use of
financial benchmarks increasingly did not gain followers with increasingly visible substantial
weaknesses of financial benchmarks . The financial benchiness grew less able to gain followers by
getting less followers with increasing visibility from the financial benchmarks. The weakness of the
financial benchmark in evaluating the success of the business becomes less precise because the object
of measurement is the management (human) while the benchmark mala less able to evaluate the
performance of management. Another disadvantage of this financial benchmark can result in the
dysfunctional behavior of a menager by finding ways to manipulate financial indicators for their
benefit (Keasey, 1999).
In addition to financial performance is not able to measure the performance of intangnible
assets and inelektual property (human resources) company, also less able to describe the past of the
company and not able to fully lead the company to a better direction (Kaplan & Norton , 1992).
Specific company performance measurement methods will vary depending on the company's
circumstances and the goals (goals) it plans. In the increasingly competitive business conditions such
as now financial information alone is not complete in measuring the performance of the company,
other non-financial information is required. Then measure the performance of the company must be
comprehensive with the "balanced scored" (Yuwono, 2003). Other factors of non-financial
performance measures are now used because they are a benchmark for a company's healthy operation.
Given the disadvantages of these financial measures Kaplan and Norton (1996) develop a more
comprehensive corporate benchmark benchmark called balanced scorecard, this measure has
advantages in terms of its relatively comprehensive measurement coverage because in addition to
considering the financial performance, balanced scorecards also consider nonfinancial performance. In
addition, the balanced scorecard not only measures outcomes but also determines the outcomes. The
essence of this balanced scorecard is to look at the non financial aspects of finance into balacing so as
to create sustainable corporate competitiveness.

5. Relationship between Variables

Small business empowerment is a strategic step in improving and strengthening the basic
economic life of the majority of Indonesian people, especially through the provision of employment and
reducing gaps and poverty levels. Thus efforts to empower small businesses must be planned,
systematically and comprehensively at both the macro and micro levels as set forth in Law Number 20
of 2008, among others, covering; (3) Strengthening of business financing institutions The three
components of the direction is the creation of empowerment of small entrepreneurs in the hope of
improving the performance of their business so that it can grow or develop into a tough and independent
business. in accordance with the mandate contained in Law Number 20 Year 2008.

a. Business Climate Growth

The growth of the climatic climate for small businesses is intended to improve competitiveness
by creating widespread opportunity opportunities, as well as ensuring a sound market mechanism. In
order to grow the climate, it is necessary to set up a series of policies related to the empowerment of
small businesses. The policy aims to provide equal opportunities for small entrepreneurs with key
players, improving the mobility of small business resources, reducing transaction costs for small
businesses, eliminating high economic costs for small businesses and revoking regulations and policies
that hamper small business empowerment.
The effectiveness of the government in empowering small entrepreneurs is directly related to
the implementation of more substantive policies to further empower small entrepreneurs through
various approaches of the program in accordance with government policy as regulated in Law Number
20 Year 2008. The policy of business environment growth for small business needs the ability of
advocacy , persuasion and coordination by the government to foster a conducive business climate to
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encourage the growth and development of business activities of small entrepreneurs. The growth of the
business climate aims to provide equal opportunities for small businesses with other business actors,
increase resource mobility, reduce transaction costs for small businesses, eliminate high economic
costs for small businesses and revoke regulations and policies that hamper small business
empowerment. The role of local governments in small businesses is how to grow the business climate
by establishing legislation and policies covering funding aspects, facilities and infrastructure, business
information, partnerships, business licensing, business opportunities, trade promotion and institutional
support (Hafsah 2004)
Evans (2003) in his research The Relationship Between Firm Growth, Size, and AgeLEstimates
for 100 Manufacturing Industries and Test of Alternative Theories of Firm Growth e at the firm level
level in the US processing industry in 1980. The results obtained: The growth of business climate
where the company it is very affecting both the performance and growth of the company from time to
time, if the growth of the business climate to support the business, then the growth of the company will
look good from time to time. Thus the policy of small business empowerment is effective if the growth
of usahabisa climate is implemented well by the government ultimately leading to increased business
competitiveness.

b. Entrepreneurial Partnership
Basically the partnership is a mutually beneficial activity with various forms of cooperation in
the face and strengthen each other. Bobo (2003), stated that the main objective of the partnership is to
develop self-propelling Growth Scheme with a strong and fair economic foundation and structure.
While Knod, 1991, Aqulano, 1992 (in Hafsah, 2003) looks at the benefits of partnerships using the
theoretical productivity approach with the assumption that productivity increases if the same inputs can
yield higher results, in the sense that if government policies relate to partnerships attempted to be
implemented to support the development of small business activities, so the impact felt by small
entrepreneurs in membanguern efforts certainly have a great implication in increasing the volume and
income of his business. If that is achieved then government policy in empowering small business is
said to be effective.
Based on that theory, when it is linked to the partnership approach, productivity improvement is
expected to be felt by the related parties. Therefore, partnership requires the existence of business
strategy by two parties on the basis of mutual need and mutual benefit by adhering to business ethics.
L. Mariotti 1993 (in Hafsah, 2003) that in order to implement partnerships in business, business ethics
is needed as a foundation for building a partnership, namely; 1) Character, integrity, and honesty, 2)
Trust, 3) Open communication, 4) Fair, 5) The personal desire of the partner, and 6) The balance
between insetiveness and risk.
There is a motivational drive to develop the business activity, then the principle of partnership
based on mutual principles, mutual strengthening and mutual benefit that contains the meaning of
moral responsibility, this is because how large or medium entrepreneurs can guide and build small
entrepreneurs as partners so that able to develop their business in achieving profit for the common
good.
While partnership based on Law Number 8 Year 2008 regarding small business empowerment
is cooperation in business relation, either directly or indirectly, on the basis of mutual requirement,
trust, strengthen and benefit which involve medium business actor with big effort. The result of the
research from the Center for Socio-Economic and Policy Studies of Bogor explained that the important
policy implications of establishing business partnership institutions are mutual need, strengthening and
mutual benefit among various partnership institutions so that both can create good relations (Hastuti,
2005)
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c. Institutional Strengthening Business Financing

Various efforts are made to empower small businesses such as through institutional
strengthening, such as banking institutions, SOEs. Cooperatives, and other institutions in the
framework of empowering small businesses. By Sabirin (2001) explains that to empower the small-
scaled business sector is to provide an affordable source of financing for businesses. Financial
institutions have a function as intermediation in the activities of an economy. If this function works
well, then the financial institution can generate value added based on business scale. This means that
even a small business if utilizing financial institutions will also provide added value increase, so that
efforts to increase the income of small entrepreneurs can be done in a productive way by utilizing the
services of intermediation financial institutions, including productive efforts undertaken by small
entrepreneurs. Research conducted by the Center for Micro and Small Enterprise Dynamics (2004)
found that bank financial institutions are getting a place in the hearts of people who are the source of
priority financing for future loan applications. Other research results by Anggraeni (2005) explains that
there is a strong and significant relationship between the provision of small business loans with the
income of small business customers PD. BPR Puspakencana Brebes. Thus, it can be explained that the
policy of small business empowerment in the field of institutional strengthening of small business
financing can be effective if the small-scale business financing institution gives big opportunity to the
entrepreneurs to get the opportunity to obtain capital loan as support for in developing their business
activities.
Baum (1995) in his proposition explains that the competencies produced are cognitive abilities,
organizational skill, skills skill, opportunity skill, industry experience, and technical skill significantly
positively affect business growth through business performance. Competence is the ability, skill, or
sufficient ability to fulfill a need such as effective performance. The results of studies conducted by
Mullins (1996) expressed the importance of building new competencies for small firms and the need to
build strong competencies to achieve business growth rates.Baun (2001) declared specific
competencies, motivations and competitive strategies significant effect on business growth based on
business performance. Another view put forward by Sandjojo (2004) that the development of small
businesses requires a conducive business environment through self-entrepreneurial learning and
entrepreneurship education.
Different views of the findings of research presented by experts, the entrepreneurial competence
owned by small entrepreneurs greatly determine the level of success in improving business
performance in order to achieve business growth targets as a compensation of the ability of an
entrepreneur who has strong competence. Discussion of entrepreneurial competence in this study
limited to competence; knowledge, skills, and abilities.

RESEARCH METHODS

The research approach used is quantitative approach (positivism) in analyzing the data. This is
because the data obtained and the results of survey research in the form of numbers or qualitative
quantitative, and has a lot of empirical research that has been done before, so that the literature review
is adequate, the variables are known, and the supporting theories already exist. The data obtained is
analyzed using statistics to answer the questions and test the research hypothesis.
This study departs from the reality faced by SMEs that can be accepted objectively. UMKM
participants will always face environmental changes in the form of intense competition from local
competitors. The role of local governments to support the existence of MSMEs by providing
appropriate policies will be more effective in raising the performance of SMEs. The research was
conducted at UMKM located in Jayapura City. The sampling technique used was cluster random
sampling. The criteria used in the selection of samples is based on the small and medium enterprises
that have been operating at least 2 tahun.Analisis the final stage in this study is testing the hypothesis.
 11

The analysis tool used to test the hypothesis is structural equation modeling (SEM) partial least square
approach (PLS) with softwareSmartPLS version 3.0.

RESEARCH RESULT

The use of Partial Least Square (PLS) to analyze, evaluate the validity and causality between
constructs of the models in this study using Smart PLS software. This research has 4 parts of
hypothesis testing related to the structural model. The path coefficient test on the structural model
(inner model) is described in Table 1 below.

Table 1. Inner Model Test Results

Relationship Coefficient Standard Error t P

Effectiveness -> Performance 0.314 0.080 3.902 0,000
Effectiveness -> Competence 0.431 0.075 5.765 0,000
Competence -> Performance 0.501 0.070 7.178 0,000

Table 1 explains that the 3 paths present in the inner models are all significant at = 0.05. In
the first endogenous construct is the competence of entrepreneurs a significant determinant factor that
is the effectiveness of the policy of small business empowerment. In the second endogenous construct
that is the performance of small business can be two significant determinants that is the effectiveness
of small business empowerment policy and entrepreneurial competence.In the inner model other than
indirect influence is the influence which is generated by an exogenous construct to an endogenous
construct after passing through another endogenous contract. The large calculation of indirect effects is
based on the final model results.
The path coefficient of the effectiveness of the small enterprise empowerment program policy
toward the small business performance of 0.314 (t = 3.902; p = 0,000) gives the decision that the
regression coefficient is significant. This result concludes that the research data supports the direct
influence of the effectiveness of small enterprise empowerment program policies on small business
performance. Thus, H1 research hypothesis which states that the policy of small business
empowerment program with high effectiveness will improve the performance of small business is
accepted.
The path coefficient of the effectiveness of the small enterprise empowerment program policy
toward the entrepreneurial competence of 0.431 (t = 5,765; p = 0,000) gives the decision that the
regression coefficient is significant. This result concludes that the research data supports the direct
influence of the effectiveness of the policy of small enterprise empowerment program on
entrepreneurial competence. Thus, the hypothesis of H2 research which states that the policy of small
business empowerment program with high effectiveness will increase the competence of entrepreneur
is accepted.
 12

Competence 1 Competence 2 Competence 3

0.435
(0.003)
0.817 0.697
(0.000) (0.000)

0.431 0.501
(0.000) (0.000)

Entrepreneurship
Competencies

Effectiveness of Small Business

Empowerment Performance
Policy
0.314
(0.000)

0.741 0.726 0.586 0.896 0.699 0.589

0.750 (0.000) (0.000)
0.822 (0.000) (0.000) (0.000) (0.000)
(0.000)
(0.000)

Effectiveness 1 Effectiveness 2 Effectiveness 3 Performance 1 Performance 2 Performance 3 Performance 4 Performance 5

Figure 1. Hypothesis Model Results

The path coefficient of competence of entrepreneurs towards the small business performance of
0.501 (t = 7,178; p = 0,000) gives the decision that the regression coefficient is significant. These
results provide the conclusion that the research data supports the direct influence of entrepreneurial
competence on small business performance. Thus, the hypothesis of H3 research which states that high
entrepreneurial competence will improve the performance of small business is accepted.

Table 2. Results of Indirect Effect on Inner Model

Line direction Through Indirect influence Information

Effectiveness -> Performance Competence 0.431 x0.501 =0.216 Signifikan

In the PLS model there is one indirect influence that is the influence of effectiveness of small
business empowerment policy on the performance of small business through entrepreneurial
competence. The existence of this indirect influence confirms that entrepreneurial competence acts as a
variable mediating the influence of exogenous constructs on small business performance. The outer
model aims to examine the relationship of each indicator to the latent construct present in the structural
model. On the indicator relationship with the construct that is reflexive the factor weight will be taken
from the value of result for outer loadings. The analysis results are described in Table 2 below.
 13

Table 3. Outer Model Test Results

Standard
Relationship Coefficient t P
Error
Effectiveness
Effectiveness 1 0.750 0.065 11.478 0.000
Effectiveness 2 0.822 0.048 17.125 0.000
Effectiveness 3 0.741 0.066 11.149 0.000
Competent
Competent 1 0.817 0.059 13.858 0.000
Competent 2 0.435 0.133 3.256 0.000
Competent 3 0.697 0.094 7.378 0.000
Performance
Performance 1 0.726 0.048 15.131 0.000
Performance 2 0.586 0.084 6.976 0.000
Performance 3 0.896 0.020 44.721 0.000
Performance 4 0.699 0.058 12.087 0.000
Performance 5 0.589 0.082 7.172 0.000

Based on the statistical pricing for the loading factor of PLS analysis as presented in Table 2
above, the test result of the relationship between the variables and the indicators is presented as
follows. Some of the most enlarged indicators indicate that a variable is strongly reflected (reflected)
by that indicator. On reflexive indicators, the loading factor is expected to be worth 0.50 or more
which would indicate that the indicator has good validation for measuring latent variables, while
Ferdinand (2000) and Sharma (1996) suggest that reflexive loading factor values can at least 0.40.

Model Feasibility

In the structural model the feasibility of the model is shown from the large R2 model and the
special composite reliability on the variable that has a reflexive relationship with the indicator. The
model feasibility indicators are described in Table 4 below.

Table 4.Feasibility Model

Composite Average variance

Construct R2 Reliability extracted (AVE)
Effectiveness - 0.815 0.596
Competence 0.186 0.696 0.447
Performance 0.484 0.831 0.502

The feasibility of PLS model is seen from the value of R2model, composite reliability and
average variance extracted (AVE). The last two feasibility can be counted if the nature of the indicator
relationship with the construct is reflexive. In the six latent constructs that exist in the PLS model is
produced composite reliabilty of 0.696-0.831 and AVE of 0.447-0.596. The overall accuracy of the
model is:
R2model = 1 (1- 0,186)(1 0,484)
= 1 0,420
= 0,580
The level of accuracy of the model to explain the relationship of the three latent constructs is
58.0% while the remainder is explained by other constructs not included in this study.
 14

The calculation result for crossloading reflexive indicator on the three latent constructs as in
Table 5 explains that each construct has a suitable indicator based on the support of research data.
Indicators in one construct tend to have a higher crossloading value when compared to other construct
crossloading values.

Table 5.Cross Loading Reflective Indicator

Indicator Effectiveness Competence Performance

Effectiveness 1 0.750 0.430 0.340
Effectiveness 2 0.822 0.287 0.258
Effectiveness 3 0.741 0.236 0.241
Competent 1 0.485 0.817 0.655
Competent 2 0.278 0.435 0.716
Competent 3 0.560 0.697 0.659
Performance 1 0.344 0.590 0.726
Performance 2 0.370 0.561 0.586
Performance 3 0.483 0.730 0.896
Performance 4 0.362 0.778 0.699
Performance 5 0.423 0.612 0.589
Description: * = cross-loading in latent variable

DISCUSSION

Relationship Effectiveness Policy of Small Business Empowerment Program With Small

Business Performance

The results of the analysis explain that there is a significant direct influence with the positive
direction of the effectiveness of small business empowerment policy on small business performance.
Given the government's policy on empowering small-scale enterprises will be a factor driving the
increase of small-scale business performance. As the research findings that there is a direct effect of
the effectiveness of small business empowerment program policies on small business performance. In
other words, the policy of small business empowerment program with high effectiveness will improve
the performance of small business. The results of this study are in line with what is mandated in Law
Number 20 Year 2008 article 5 that the direction of the creation of the empowerment of small
entrepreneurs in the hope of improving the performance of its business so that it can grow or develop
into a tough and independent business. Thus efforts to empower small-scale enterprises must be
planned, systematically and comprehensively at both the macro and micro levels as set forth in Law
No. 20 of 2008 on empowerment of small businesses, among others, include; (1) Business climate
growth (2) Developing business partnerships, (3) Strengthening of business financing institutions
In the variable of effectiveness of the empowerment policy of small business, there are three
indicators studied; business climate, business partnerships, and institutional strengthening of business
financing. Indicators of business climate growth have relatively high average value compared to the
partnership indicator and also has a high loading factor. Indicator of business climate is more dominant
or better than the indicators of partnership endeavor. This illustrates that the policies of programs
related to the empowerment of small-scale enterprises in Jayapura City have been run in accordance
with the expectations of small scale businesses, especially in terms of business climate. Small business
actors will have a positive view on the growth of business climate, among others, because it can feel
the availability of business information both in the form of product info and costs, the adequacy of
 15

business support facilities such as transportation and markets, the provision of excellent bureaucratic
services and open wide business opportunities.
The findings of this study are consistent with Evans's (2003) research hazard that the growth of
the business climate in which the firm is strongly influences both the performance and the growth of
the company over time, if the growth of the business climate supports the business, then the company's
growth will look good from time to time. Thus the policy of small business empowerment is effective
if the climate growth of the usahabisa implemented properly by the government which in the end
causes the business competitiveness higher.
The effectiveness of the government in empowering small entrepreneurs is directly related to the
implementation of more substantive policies to further empower small entrepreneurs through various
approaches of the program in accordance with government policies regulated in Law Number 20 Year
2008. The policy of business environment growth for small business needs an advocacy capacity ,
persuasion and coordination by the government to foster a conducive business climate to encourage the
growth and development of business activities of small entrepreneurs. The growth of the business
climate aims to provide equal opportunities for small businesses with other business actors, increase
resource mobility, reduce transaction costs for small businesses, eliminate high economic costs for small
businesses and revoke regulations and policies that hamper small business empowerment. Also in line
with Hafsah (2004), the government's view on small business is how to grow the business climate by
establishing legislation and policies covering funding aspects, facilities and infrastructure, business
information, partnership, business licensing, business opportunity, trade promotion and support
institutions that can improve the performance of small businesses.
Positive perceived partnership is the most important dimension in encouraging small business
performance through the involvement of government, business, and universities, State-Owned
Enterprises and Private Companies. Basically the partnership is a mutually beneficial activity with
various forms of cooperation in the face and strengthen each other. The findings of this study are in line
with the results of the research (Hastuti, 2005) which explains that the important policy implications of
establishing business partnership institutions are mutual need, strengthening and mutual benefit among
various partnership institutions so that they can both create good relationships. Aqulano (1992 in
Hafsah, 2003) looks at the benefits of partnerships using a productivity theoretical approach with the
assumption that productivity increases if the same inputs can yield higher results, in the sense that if
government policies with regard to partnership attempt are implemented to support the development of
small business activities then the impact felt by small entrepreneurs in building their business certainly
has implications in increasing the volume and income of their business. If that is achieved then
government policy in empowering small business is said to be effective.
Based on that theory, if it is related to the partnership approach, the improvement of small
business performance is expected to be felt by the related parties. Therefore, a partnership is required to
have a business strategy undertaken by two parties on the basis of mutual need and mutual benefit by
adhering to business ethics. There is a motivational drive to develop the business activity, then the
principle of partnership based on mutual principles, mutual strengthening and mutual benefit that
contains the meaning of moral responsibility, this is because how large or medium entrepreneurs can
guide and build small entrepreneurs as partners so that able to develop their business in achieving profit
for the common good.
While the partnership based on Law Number 8 Year 2008 regarding small business
empowerment is cooperation in business relation, either directly or indirectly, on the basis of mutual
need principle, trusting, strengthening, and profitable involving middle and middle business actors. the
partnership which is the commitment of Jayapura Municipality Government in the empowerment of
small-scale business should be supported by local regulation related with which is directly related to
business partnership. In the research findings although responded positively, but seen from loding
factor is still low compared with the growth of business climate. it's a matter of partnership trying as
part of the empowerment of small business is very important.
 16

Government efforts to strengthen the institutional strengthening of business financing such as

the availability of banking financial institutions or other financial institutions is sufficient to strengthen
the capital of small businesses, various types of business financing available, the amount of varied
financing, the period of financing is loose enough, the procedure is not too complicated financing , the
feasibility of financing and financing guaranty is still able to be met by small entrepreneurs. Small
business actors there is a sizable view that the government has provided many programs related to
business financing, so that the different results of the effectiveness measurement of small business
empowerment program through this indicator becomes weak.
Based on the findings of this research, particularly related to the strengthening of business
financing institutions, the government has provided various financial institutions such as banking
institutions, SOEs, Cooperatives, and other institutions in the framework of small business
empowerment. In Kota Jayapura, business financing institutions based on statistical data of the last
three years have increased significantly so that small entrepreneurs more easily choose financing
institutions that are able to provide services in the form of affordable credit facilities in terms of
magnitude krdit, as well as from the side of interest rates are cheaper loans. This is in line with the
opinion of Sabirin (2001) explains that to empower the small business sector needs to be provided
source of affordable financing business. It is known that financial institutions have the function of
intermediation in the activities of an economy. If this function works well, then the financial institution
can generate value added based on business scale. If the entrepreneur utilizes the financial institution
will also provide an increase in added value, so that efforts to increase the income of small
entrepreneurs can be done in a productive way by utilizing the services of intermediation financial
institutions, including productive businesses undertaken by small entrepreneurs.
Research conducted by the Center for Micro and Small Enterprise Dynamics (2004) found that
bank financial institutions are getting a place in the hearts of people who are the source of priority
financing for future loan applications. Other research results by Anggraeni (2005) explains that there is
a strong and significant relationship between the provision of small business loans with the income of
small business customers. Thus it can be explained that the policy of small business empowerment in
the field of institutional strengthening of small business financing can be effective if small business
financing institution gives big opportunity to entrepreneurs to get opportunity to obtain capital loan as
support in developing their business activity.

Relationship of Entrepreneurship Competence With Small Business Performance

The results of this study give a conclusion that the data of research results support the direct
influence of the motivation berwirausahaterhadap performance of small business. Thus it can be stated
that the higher entrepreneurial competence will improve the performance of small business The
findings of this study indicate that an entrepreneur with armed with entrepreneurial competence that
they have of course greatly support his profession as a person who wrestle the business world. This
reflects the attitude of an entrepreneur who must have in the form of competence skills, knowledge,
and abilities.
The research findings are in line with the results of research conducted by Baum (2001) in his
proposition that the competence is cognitive ability, organization skill, decision skill, opportunity skill,
industry experience, and technical skill significantly positively affect business growth through business
performance. Competence is the ability, skill, or ability sufficient to meet a need such as effective
performance. The results of a study conducted by Mullins (1996) stated the importance of building
new competencies for small companies and the need to build strong competencies to achieve business
growth rates. Thus it can be explained that the entrepreneurial competence owned by small
entrepreneurs greatly determine the level of success in improving business performance in order to
 17

achieve business growth targets as a compensation of the ability of an entrepreneur who has strong
competence.
Knowledge (knowledge) owned by small entrepreneurs in the city of Jayapura still gap occurs,
in the sense that to achieve success in the business must be supported by the science related to the type
of business in cultivation. Knowledge in entrepreneurship is knowledge of business management,
product or service knowledge, consumer knowledge, promotion and market strategy. Strong
competence should be supported by a high level of knowledge or sufficient.
The effect of enhancing entrepreneurial competence is linear, where it can improve the
performance of small business simultaneously. However, the improvement of knowledge competence
has the potential to decrease the performance of small-scale business if it is not encouraged by
entrepreneurs to increase their knowledge in the business field either in formal education or training.
performance of small businesses that they need to provide adequate education in managing and
developing their business. That is, the future should be encouraged to be born entrepreneurs with
higher educational background, especially from college graduates. However, there is a need for a clear
direction from the education system in universities that provides more balanced practical content with
theoretical knowledge. In addition, the government's efforts to increase vocational education at SMK
level need to be appreciated and supported in order to be born entrepreneurs who have the competence
of expertise that are adequate in building and developing the business they run.
Based on the respondents' educational condition, this research indicates that they really need
education (additional knowledge) which is practical for the management and growth of their business.
So it becomes very important for entrepreneurs need non formal education in the form of training and
workshop that lead directly to the strengthening of entrepreneurial competence able to build
competence in the face of competition.

Relationship Effectiveness Policy Small Business Empowerment Program And Entrepreneurship

Competence With Small Business Performance

The results of hypothesis testing in this study indicate that the effectiveness of small business
empowerment program policies, entrepreneurship motivation, and competence kepirauahaan have a
significant relationship to the performance of small businesses. Thus it can be concluded that if the
government runs a small business empowerment program especially the growth of business climate is
supported by the motivation of entrepreneurship and entrepreneurial competence owned by every
small entrepreneur then the performance of small entrepreneurs will be more increased.
Local governments can empower small businesses through the creation of appropriate
regulations. Empowerment is intended to make small businesses a strong and independent business in
the national economy. In the process of empowerment involving government, business, and society. In
this case the government should create a conducive business climate and conduct guidance and
development in the form of guidance and other assistance.
In an effort to empower small businesses, the government must create a policy regulation of
funding issues. These rules are set in order to help small businesses to grow healthier (Prawirokusumo
1999). The Government has established rules and policies to: (a) expand funding sources, (b) improve
access to financing sources, and (c) provide ease in financing.
As an effort to further improve the performance of small-scale enterprises, the empowerment of
small-scale enterprises must be planned, systematic and comprehensive both at the macro level, as well
as on the micro level. For this purpose, policy measures include: (1) creating a healthier business
climate to open the widest possible business opportunity, ensuring business certainty, and promoting
economic efficiency; (2) development and capacity building of small business support institutions in
order to be able to increase access to productive resources in order to utilize open opportunities and
potential resources, especially available local resources; (3) entrepreneurship development and
 18

competitive advantage of small business through entrepreneurship motivation, improvement of

entrepreneurship competence through the growth of soul and attitude.
Efforts to give room for business actors in improving their business performance, the regional
government in implementing Law Number 20 Year 2008 which is followed by regional regulations
related to empowering small-scale enterprises, it is necessary to have a synergy with the interests of
small business actors in developing its business activities. The policy of small business empowerment
related to the growth of conducive business climate. Improving the business climate so that it becomes
more conducive should be a priority in the development of small-scale enterprises that provides equal
opportunities to business actors in developing business activities, including access to productive
resources and no difference in treatment between small and large entrepreneurs in accessing
information related to policies in overall economic empowerment.
A conducive business climate is developed by the government and local governments by
establishing legislation and policies covering 8 aspects: funding, facilities and infrastructure, business
information, partnership, business licensing, business opportunity, trade promotion and institutional
support.
In the framework of developing business support systems for small businesses to improve
access to productive resources, such as capital / finance, technology, and markets so as to take
advantage of open opportunities and potential resources, especially available local resources, : (1)
expansion of financing sources for small businesses, including improving the quality and capacity or
scope of services for every small entrepreneur, (2) development of BDS-P / LPB business development
providers (business service providers) small, (3) development of market improvement for small
business products, including through business partnerships.
As an effort to facilitate small businesses in expanding access and market share, among others,
continued promotion of small business products through exhibitions, both inside and outside the
country. This activity is also done by encouraging community participation in developing promotional
activities of small business products. The important thing that has been done is to pioneer the
development of small business database products, both export oriented and domestic market oriented.
The results are then used to build trading boards that serve as electronic market places that can be
accessed electronically (on-line).
To realize the development objectives in the small-scaled business sector, it is necessary to
prepare a strategic policy to increase or accelerate the growth of the small business sector, especially
the increase in income and welfare of small entrepreneurs through the improvement of small-scale
business performance. The results of observations in the field found several factors supporting regional
economic development through the development of small businesses, among others: (1) the potential
of small entrepreneurs, (2) financial institutions perbankkan and non perbankkan, (3) related agencies,
(4) community, 5) college
Effective small business development policies should be done more broadly and integrated, not
just creating a list of standalone financial and technical support programs in the absence of links
between each other. Small business development policies require assessment and reorientation of the
government's role in many aspects. Good government policy is one of the central issues in sustainable
small-scale enterprise development, therefore it is necessary to revise the government's small business
development policy. Government regulation and its implementation greatly affect the access of small-
scale enterprises .
Legal uncertainty will create distortions in decision making will complicate the development of
micro enterprises especially in the face of a dynamically evolving market. Specific steps to promote
small business will only be a false if not done in an integrated way. The government in developing
small business needs to implement policies and programs transparently and responsibly. The
simulation provided to improve technical and financial competitiveness is considered not able to
directly overcome the external and internal constraints experienced by most small businesses in
Jayapura City. the role of the government is to create a conducive climate so that small businesses can
 19

face competition. With increasing business opportunities and access to productive resources will
enhance competitiveness and entrepreneurship. Integrated small-scale business development to
improve competitiveness and access of small-scale enterprises to productive resources needs to be
done through policy areas: infrastructure development, regional development, communications and
transportation, applied research and education, promotion, trade and investment.

CONCLUSION

The results of the analysis and discussion that have been done in the previous section will produce
some conclusions, among others:
1. Effectiveness of small business empowerment policy has a significant relationship with small
business performance. The results of this research indicate that the effectiveness of small business
empowerment policies includes; the growth of business climate, business partnerships, and the
strengthening of business financing institutions contribute to the improvement of small-scale
business performance in terms of sales growth, capital growth, profit growth, labor growth and
market growth.
2. Entrepreneurship competence has a significant relationship with small business performance. The
results of this research indicate that entrepreneurial competence includes; competence of
knowledge, skill competence, and business ability competence contribute to the improvement of
small business performance in terms of sales growth, capital growth, profit growth, labor growth,
and market growth.
3. The effectiveness of small business empowerment policies has a significant relationship with
entrepreneurial competence. The results of this research indicate that the effectiveness of small
business empowerment policies includes; business climate, business partnerships, and institutional
strengthening of business financing contribute to entrepreneurial competence include; competence
knowledge, skills competence, and competence of business ability.

Theoretical Implications

This study is based on the view of Smith, 1776 (in Campbell, 1994) in his economic theory of
growth that, the process of growth begins when the economy is able to do the division of labor will
increase people's income. In order to achieve community expectations in terms of obtaining better
revenues it is necessary to outsource through empowerment approaches, as Payne (1997) explains that
empowerment is to help clients gain the power to make decisions and determine what actions will be
done through enhanced capabilities and flavors confident to use the power he has.
In order to implement the concept of empowerment, the government and the Parliament have
agreed to enact Law No. 20 of 2008 on UMKM as a legal umbrella for the development of MSME
which is a national policy. This policy is doperasionalkan in the form of ministerial decisions to be
followed up by local government with the form of regional peratran, as explained by Bromley a policy
implemented in three levels, namely policy level, organization level, and operational level.
Small business empowerment policies drawn in various empowerment programs can be
perceived to be useful in terms of effective if the program terebut achieved in accordance with the
objectives to be achieved. Rae (1990) explains that the effectiveness is as a measurement against the
achievement of the goals set previously. An activity can be said to be effective if the output is the same
or according to a predetermined goal and if it is not appropriate, then the activity is said to be
ineffective.
The findings in this study have proven that the effectiveness of small business empowerment
policy and entrepreneurial competence have a positive and significant relationship. In this study also
presented a model which illustrates that the effectiveness of small business empowerment policy has
an indirect relationship to small business performance through entrepreneurial competence.
 20

If the government implements the policy of empowering small businesses effectively and
supported by entrepreneurial motivation, as well as high entrepreneurial competence, the performance
of small entrepreneurs is higher. With the support of government policy accompanied by
entrepreneurial spirit and entrepreneurship owned by entrepreneurs will certainly be able to build
partnerships with related parties, such as the financial sanctuary, the owners of capital, government
services that directly relate to business activities run, and large entrepreneurs, of course will have an
impact on increasing the income of small entrepreneurs.

Practical Implications

The results of this study provide practical implications for efforts to improve the performance
of small business. Therefore, the government in implementing the policy is very determine the
direction and objectives. Development of the region largely depends on partnerships between
government, business and non-governmental organizations. This partnership facilitates coordination
and cooperation. Local pairs from the private sector can help to exploit local opportunities in
developing policies and strategies that suit local needs. The key key to this partnership is the
mechanism for correctly managing and coordinating different resources and efforts of different
business actors. Planning and implementation are implemented in accordance with their capabilities
and strengths. During this process it is important to note, namely to form cooperation networks and
develop mutual trust.
Due to the limitations of institutionalization, partnerships to develop small businesses
often do not work as expected. Therefore local governments should take the lead in establishing a more
stable and formal mechanism to help provide partnerships as an institutional basis and the ability to
design and implement business development plans. The concept of ruralness to increase local revenues
through increased empowerment of small businesses is closely related to corporate social
responsibility. In line with the CSR philosophy, the company wants to dedicate itself to building local
partnerships, strengthening local capacity, protecting the environment and contributing funds for
regional development.
Suggestion
For financial institutions in the scale of banking and micro scale associated with the
empowerment of community businesses can utilize the results of research to be used as a consideration
in perfection of empowerment programs that are currently being implemented or in the future,
especially training curriculum that put forward the required practices dilapang namely
entrepreneurship training oriented to public services as well as various motivational training and
negotiation techniques to expand the network of small business actors.
For small business associations and investors in small credit financing, this research can be used
as a reflection of the phenomena occurring in the field as well as for consideration of strategic
measures by preparing a realistic business plan for small business development so as to make the
micro enterprise bankable . For small business partners, the results of this research become references
in advisory activities by implementing participatory participatory facilitation methods and prioritizing
local wisdom as well as considering leadership and entrepreneurship aspects so as to foster social
capital and achieving program targets.
For the Jayapura City Government, especially the offices related to the empowerment of small
businesses, there is a need for Standard Public Service (SPP) and Standard Operating Program (SOP)
for small business empowerment program based on the potential of industrial and trade area and
designing the program of small business empowerment that prioritizes wisdom local and according to
the needs of small entrepreneurs.
The development of small enterprise empowerment program both at provincial and district level
should facilitate the formation of institutions of empowering small-scale enterprises into institutions
that have hukumpada stage of self-reliance so as to access financial institutions both banks and non-
 21

banks. All offices related to the empowerment of small-scaled businesses should be the leading sector
in the field of small business empowerment, so that a policy is needed on the potential mapping of
program locations to be chosen by taking into account the interrelationship between the concept of the
region as well as the aspects of Human Resources that put forward aspects of business climate growth
and enhancement of entrepreneurial wawaan.
The involvement of stakeholders, especially local government, is needed to accelerate the
improvement of small business performance through intensity of coordination, information, synergy,
and synchronization with business actors so that small entrepreneurs can move to middle and big
business status as mandated by Law -The Empowerment of Small Business Enterprises Number 20
Year 2008.
Local Government of Jayapura City, in this case the Department of Industry and Trade Office
still using the previous Regional Regulation and has not issued a Local Regulation related directly to
the empowerment of small businesses so impressed in the compilers of small business empowerment
program has not been integrated thoroughly based on Law Number 20 Years as guidelines for
implementing the Small Business Empowerment Policy. Therefore, to better accommodate the
interests of small-scale business development, it is necessary to issue more special regional regulation
to manage small business management mechanisms starting from the establishment of business
licenses, business location arrangement, business climate growth, business partnerships, institutional
strengthening of business financing to business promotion and marketing to build synergicity and
konektisitas between government and entrepreneurs
 22

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