Industrial cluster development: Examining the impact of CSR in Indonesia

In 2011, in an attempt to accelerate economic growth, the Indonesian Government introduced a strategic master plan (MP3EI) for the country. Part of the plan recognized Michael Porter's suggested theory that the competitiveness of a nation can be obtained through a clustered industry model. To support and fund such a model the government is relying on the established laws regarding corporate social responsibility (CSR), which targets two types of organization ownership: private enterprises and state owned enterprises (SOEs). In regards to funding and supporting industry clusters, problems arise when SOEs are semi-privatized, due to the over-lapping fact of being within both the private enterprise laws and SOEs regulations. This study examines the effects of firms' CSR programs within a cement industry cluster. The cluster was a mixture of cement manufacturers and cement paving producers, with both industries located close to each other. Problems arose when the cement manufacturer, a privatized SOE, was forced to move to a new mining industrial area, which included both SOEs and private cement manufacturers. With the paving industry cluster remaining in the original location it wasn't long before problems of competitiveness became an issue. Theoretically, cluster support from CSR should focus along companies' value chains. However, the study found that both the privatized SOEs and the private cement companies did not link their CSR programs to the paving industry, but interesting, for different reasons. SOEs seem to address the gap in bureaucracy for CSR implementation, while private companies address the gap of localized concerns. Overall, both types of organizations were not responding to the needs of small companies within the clustered industry with respect to join and sustainable development.