Innovation and Social Capital in the Small-Medium Enterprises: a case of bamboo handicraft in Indonesia

This paper aims to seek what type of innovation and to estimate the impact of social capital on the innovation in the small-medium enterprises (SMEs) in Indonesia. The data used in this paper was collected from May to June 2008 in several clusters of bamboo handicraft producers in the district of Sleman, Yogyakarta Special Province. The research found that more than half of respondents are innovative producers. Innovation of product and organizational are the important types of innovation in the bamboo handicraft. Social capital, measured by an index of trust significantly influences the innovation index. Other important variables that influence the index of innovation are location, sex, and education. However, in the logistic regression, only education that significantlly explain the probability of innovation.