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The purpose of this paper is to analyze the barriers in public policy faced by the small and medium enterprises (SMEs) in a creative economy at the local level.

This research uses a qualitative case study method, and the informants are selected with a purposive sampling technique. The researchers collected data through in-depth interviews of 15 informants. The informants include local government officials, SME actors and creative economy activists. Data are analyzed using thematic analysis in the qualitative method.

This study shows that the development of SMEs in the creative economy is constrained by the mindset and administrative behavior of the local policymakers who tend to be normative, routine-minded and inflexible. Consequently, the local government’s administrative capacity in the creative economy sector has not demonstrated significant support for efforts to increase the competitiveness of creative economies at the regional level.

Research implications suggest how the findings may be important for the policy and practice of SMEs’ development of a creative economy at the local level. The findings suggest that local government needs to engage with the actors and activists of SMEs in the strategic formulation for the development of a creative economy.

This study extends the theoretical and practical knowledge about policy implementation of SMEs’ development by a local government in the creative economy sector in Indonesia.