An Analysis of Innovation Network Performance on the Palm Oil Industry in North Sumatera

Abstract

Indonesia and Malaysia shared 85% of global palm oil production by weight in 2013, according to United States Department of Agriculture (USDA, 2014). Indonesia overtook Malaysia as the biggest producer of palm oil and reached a total production of 30 million tons in 2014 (Ministry of Agriculture, 2015). Although Indonesia became the leading country in the production of palm oil, most of this commodity are exported as Crude Palm Oil (CPO) and Crude Palm Kernel Oil (CKPO) to Europe, China and India, so the value added going to another country. Therefore, the government wants to resolve this problem by increasing the added value of palm oil products. Innovation is the key factor to increase the added value of palm oil products. Indonesian government set North Sumatera as a center of palm oil industry and encourage the growth of innovation in this region. Advances in innovation are considered as the main factor that affect the regional competitiveness and become the key factor for increasing national economic growth. Moreover, collaboration between government, universities and firms are important to produce the expected innovation. This paper assess the effectiveness of network among actors on the palm oil industry in North Sumatera. A Social Network Analysis (SNA) was carried out to determine the structure and performance of this network. The result show that the government play insignificant role in this industry, while research institutions have more influence. Moreover, this study also identify the barriers which inhibit the collaboration among actors. This study use interpretive analysis based on the interviews to recommend some action plan, which are intended to improve the network.