Small-scale Business in Rural Java: Involution or Innovation?1

The paper presents two case studies ofbusiness entrepreneurs in a rural and densely populated area of Indonesia. Findings are discussed against the background of theories on involution, innovative milieus and industrial clusters. The paper argues for taking an actor's point of view in analysing contexts for entrepreneurship. Proximity and close neighbourhood relations count for a potential easy spread of information and new business ideas, while the fear of knowledge leakage and spillover effects from business innovations is seen as factors that hinder the learning dynamics and thereby put a limit to social welfare gains. Local entrepreneurs are seen avoiding sharing of information due to the fear of imitation by competitors. The conclusion recommends that neighbouring university institutions be utilised for professional business services. There is a need for improved access to market information particularly for the rural small-scale enterprises.