The importance of entrepreneurship and innovation for smallholder vegetable farmers in West Java, Indonesia

Farmers in developing countries are mostly smallholder farmers operating farms less than two hectares. They face the pressure of business environmental changes emerging from globalization and agrifood market transformation, i.e., the growth of modern food retail and fresh-food exporters. The rural studies focus on the effect of environmental changes (e.g., the growing food demands of supermarkets) on smallholder farmers’ livelihood. However, current research has not adequately addressed what mechanisms make smallholder farmers benefit from these environmental changes. Furthermore, it remains unclear how smallholder farmers discover and identify opportunities that emerge from these situations. Consequently, there is a need to investigate what factors allow smallholder farmers to adapt to and benefit from these environmental changes. Successful or failed adaptation will be reflected in their farm performance. Hence, this thesis's main research question is formulated as follows: what factors enable smallholder farmers to enhance farm performance and, ultimately, identify opportunities in changing environments?

Past research on innovation in the agricultural sector mainly focuses on innovation adoption, such as experimenting with new seeds or new farming technologies introduced by suppliers or research institutes. To some extent, farmers may also be involved in the process of innovation generation, such as formulating substitutions for chemical farm inputs using local resources or experimenting with local adaptations for new farming technologies. Although farmers may be involved in one or both of these types of process innovation, it remains unclear the extent to which entrepreneurial oriented farmers (i.e., proactive and risk-taking farmers) tend to use ready-to-use innovations (i.e., innovation adoption) or develop innovations to find solutions themselves (i.e., innovation generation). It is also unclear whether innovation adoption or innovation generation has a more significant impact on introducing product innovations (i.e., new or improved products). Therefore, this thesis investigates the subsequent relationships between entrepreneurial orientation, innovation adoption, innovation generation, and product innovation. Eventually, successful process innovation and product innovation may be reflected in enhanced farm performance. Accordingly, the research question is as follows: in what way do entrepreneurially oriented farmers deploy innovation adoption and innovation generation to introduce product innovations, and does this enhance farm performance?

The PLS-SEM analysis results demonstrate that entrepreneurial orientation is more significantly linked to innovation generation than to innovation adoption. This finding indicates that entrepreneurial oriented farmers tend to try to find new solutions themselves. Further relationships show that innovation adoption is more substantially linked to product innovation than innovation generation. These results indicate that, in the end, it is more efficient for entrepreneurial smallholder farmers in West Java to apply ready-to-use innovations than to generate innovations themselves.

Smallholder farmers fundamentally have limited resources (e.g., farmland or capital) to operate their farms. However, it remains unclear what enables smallholder farmers to adapt to environmental changes and develop innovations when they lack resources. The literature indicates that linking to specific types of networks potentially enlarges farmers’ access to essential resources and information. Numerous studies have investigated the importance of networks on

farmers’ livelihood; however, these studies pay little attention to network content contribution (i.e., information discussed between actors in the networks) to farm businesses. This thesis explores network content in terms of business ties (i.e., relationships between actors in the networks that exchange information related to markets and opportunities), technology ties (i.e., relationships between actors in the networks that exchange information related to technologies and problem solving), and network heterogeneity (i.e., the diversity of actors’ roles in the networks). The research question is formulated as follows: what types of networks (i.e., network content in terms of business and technology ties and network heterogeneity) are linked to more entrepreneurial farmers, and what types of networks improve farm performance?

The results show that more entrepreneurial farmers with more business ties have enhanced innovative performance and financial performance. A higher level of network heterogeneity only enhances innovative performance while having a higher number of technology ties is not related to either innovative or financial performance.

The results show that more entrepreneurial farmers with more business ties have enhanced innovative performance and financial performance. A higher level of network heterogeneity only enhances innovative performance while having a higher number of technology ties is not related to either innovative or financial performance.

Smallholder farmers are encouraged to enhanced farm performance and identify opportunities beyond their existing farm activities to benefit from these environmental changes. The literature suggests that experience plays a vital role in allowing entrepreneurs to identify opportunities. The experience contains rich knowledge that enables entrepreneurs to understand the environmental changes better and translate them into opportunities. Smallholder farmers in developing countries may find it difficult to access resources; however, experience linking to business partners (i.e., modern markets, suppliers, and supporting organizations) might help farmers understand the market better. Moreover, environmental changes may also stimulate farmers to be more entrepreneurial oriented by being proactive and bear more risks. The research question is formulated as follows: what is the impact of entrepreneurial orientation on the relationships between smallholder farmers’ experience and opportunity identification?

Using the PLS-SEM analysis, the results prove that entrepreneurial orientation fully mediates the effect of farmers’ experience in linking to modern markets on opportunity identification. Furthermore, entrepreneurial orientation partially mediates the effect of farmers’ experience in linking to supporting organizations on opportunity identification. However, entrepreneurial orientation does not mediate the relationship between farmers’ experience in linking to suppliers and opportunity identification. These findings confirm that being proactive and risk-taking helps farmers use their experience to identify opportunities coming from environmental changes.

The contributions of this thesis are as follows. First, this thesis’ results contribute to the literature on entrepreneurship in the context of the agricultural sector in developing countries by investigating the mechanisms that allow smallholder farmers to be successful in adapting to and benefiting from environmental changes, as reflected in enhanced farm performance. This thesis also confirms that agricultural entrepreneurship is relevant to describe entrepreneurship for small business owners who usually get less attention in mainstream entrepreneurship studies. Second, this thesis demonstrates that innovation adoption tends to be market-oriented, and innovation generation tends to be problem-solving oriented for smallholder farmers. Thus, this thesis contributes to the current debate on the relative importance of innovation adoption or innovation generation facilitating smallholder farmers to successfully adapt to environmental changes, measured in this thesis as enhanced farm performance. Third, this thesis contributes to the literature by analyzing the types of network (content and heterogeneity) that enable entrepreneurial smallholder farmers to face environmental changes. Fourth, this thesis also contributes to the opportunity identification literature by expanding this theory’s relevance to smallholder farmers facing environmental changes.

We recommend that farmers consider adopting innovations to produce new or improved products quickly. Afterward, if needed, they can decide to fit the technologies to their needs by innovation generation. Hence, innovation generation may complement innovation adoption over time. We suggest that policymakers encourage farmers to share their knowledge to make innovation adoption easier. Furthermore, we also suggest policymakers may initiate a multi-stakeholder platform to facilitate various actors in the vegetable sector, including smallholder farmers, to share the latest information and learn from each other. This platform may stimulate smallholder farmers to keep innovating to meet market demands.