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The purpose of this paper is to use case study evidence to explain that enterprise agglomeration in itself may not advantage business development. Agglomeration has the potential to bring enterprise advantage but whether this occurs depends on additional supportive conditions.

The paper re‐examines case studies of Indonesia clusters from a more critical perspective than adopted in their original presentation. This critical perspective follows a realist assessment of agglomeration in which advantages depend on specific business environments.

Five processes are identified that limited the advantage obtained from agglomeration: internal segmentation; enterprise independence; technological pooling; excessive competition and linkage dependencies. Three attributes that influence whether agglomeration assists business and regional development: enterprise diversification, entry barriers and cluster scale.

The paper is limited by its reliance on previously completed case studies rather than a set of purpose‐designed case studies.

Business promotion agencies should be aware that not all enterprise clusters have an equal likelihood of sustaining economic growth.

The combined evidence from previously published case studies of Indonesian cluster experiences adds to the understanding of the conditions required for agglomeration advantages to be realised.

The Indonesian Government has taken many measures to support the development of small and medium enterprises (SMEs), which are expected to play a crucial role in employment creation, gross domestic product growth, and non‐oil and gas export development. The purpose of this paper is to examine recent developments of SMEs in Indonesia. More specifically, it aims to address the following research questions: How important are SMEs in Indonesia? What are their main constraints? What is the impact of women entrepreneurs on SME development? and Can Indonesian SMEs be sources of innovation?

The paper analyzes data from Indonesia's National Agency of Statistics and reviews key literature and secondary data on Indonesian SMEs.

First, SMEs have been the main player in domestic economic activities as they account for more than 99.9 percent of all firms and employ 96.2 percent of the workforce. Second, key SME constraints include lack of finance and marketing difficulties. Third, representation of women entrepreneurs is still relatively low and can be attributed to low level of education and cultural/religious constraints. Finally, SME innovation capability is low for several key reasons.

The paper considers the involvement of women in SMEs in a Muslim‐majority country and contributes to the literature on the innovation capability of SMEs.

Since the early 1970s up to recently Indonesia has shown a remarkable economic development process. As a result, in 1993 the country moved into the lower middle‐income group of countries (as classified by the World Bank). During the 1980s the country's economy had about 6 percent per annum average growth in gross domestic product (GDP) and it increased to about 7 percent a year in 1994 and 1995. In 1994 the country's per capita gross national product (GNP) reached an estimated US$884. It is expected that if Indonesia can sustain its present economic growth of 7 percent per year the country's per capita income would rise to over US$1,000 before the end of this century.

The Indonesian government has been trying to support the development of small and medium enterprises (SMEs) in the country, as these enterprises are expected to play a crucial role not only for employment creation but also for GDP formation and export development. The paper aims to address the following three questions. First, are networks important for the development of SME clusters, especially for those involved in export activities? Second, in what type of clusters are networks well developed? Third, what is the role of government; does it also play as an important network for SME cluster development?

This paper is based on an ongoing research on the importance of networks in the development of export‐oriented SME clusters in Indonesia. Although the paper also discusses other important issues related to the development of SMEs in the country, i.e. constraints facing the enterprises and women entrepreneurs, the paper focuses on the importance of networks.

First, SMEs are of overwhelming importance to Indonesia because they account for more than 90 percent of all firms outside of the agricultural sector. Second, the main constraints faced by small entrepreneurs are, lack of finance and difficulties in marketing. Third, the representation of women entrepreneurs in Indonesia is still relatively low which can be attributed to various factors, e.g. low level of education and lack of training opportunities that make Indonesian women severely disadvantaged in both the economy and society. Finally, although in general Indonesia is not well represented with small and medium industrial clusters that feed into global commodity chains, some clusters have gradually become export‐oriented. Among many factors, well developed networks especially with traders, trading houses, and foreign tourists are indeed an important factor for their increasingly export activities. Even these agents have played more important role than supports from government for their successful export.

The paper examines the importance of networks for the export‐oriented SME clusters in Indonesia.