Weak Institutional Embeddedness: The State and Textile Business in Bali, Indonesia

Abstract

Social scientists have developed four theoretical frameworks for analysing Indonesia regional political economy. These prominent frameworks are the state, the market, the culture, and the politico-business oligarchy. By using the different framework of embeddedness of state, economy, and society, this paper argues that healthy institutional embeddedness is a pre-requisite for vibrant textile development. By situating Bali as a case study, this paper shows processes of business inclusion and exclusion from international and domestic markets as consequences of weak institutional embeddedness. It is suggested that the state should institutionally innovate itself and provide ample spaces for regional textile industries to cooperate, not compete, with national and new foreign textile actors. Such innovation will bring the former back into the mainstream of textile business.

Keywords: Textile Industry, Embeddedness, Institutional Innovation, Social Network, Indonesia