Market Organization in Indonesia: Javanese and Chinese Family Business in the Jamu Industry

In Southeast Asia, people of Chinese origin have a remarkably strong presence in trade and industry. The main question addressed in this paper is whether the organization of inter-firm linkages in the Indonesian herbal medicine (jamu) industry resemble characteristics of the Chinese family business or whether, in this industry, a distinct mode of market organization has developed. The business systems approach forms the basis of the analytical framework which is comprised of four market organization characteristics and five key social institutions. In the Indonesian national context, a number of mutually connected social institutions constitute a favourable environment for the development of the Chinese family business system. Results from case studies of eight large and medium-sized jamu firms owned by either Indonesian Chinese or indigenous business people show that, in many respects, the market organization in the Indonesian jamu industry reflects Chinese family business characteristics. However, a distinct Javanese characteristic was also found. The jamu firms display strong paternalistic behaviour towards their suppliers and customers, which can be linked to Javanese authority relations known as bapakism and the high level of collectivism within micro-societies in Indonesia.