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Rachmi, A 2013, 'The HRM practices of Indonesian medium-sized companies in the textile industry in Java', DBA thesis, Southern Cross University, Lismore, NSW.

Copyright A Rachmi 2013


This exploratory research investigates human resource management (HRM) practices in medium-sized enterprises in the textile industry in Java, Indonesia. The three specific research questions are: ‘What HRM practices in terms of recruitment and selection, training and development, remuneration and rewards, performance appraisals and industrial relations are implemented in medium-sized textile companies in Java?’, 'Do Javanese cultural influences have an impact on the way HRM is practised in medium-sized textile companies in Java?', and ‘What are the relationships between HRM practices in medium-sized textile companies in Java and perceptions of company performance?’

Small and medium-sized enterprises (SMEs) play an important role in Indonesian economic development. They contribute the greatest part of national GDP, are the primary source of employment, support export growth and help the development of entrepreneurship, industry and the rural economy. SMEs in the textile industry supply the domestic market and for SMEs producing batik products, they support the existence of batik as an Indonesian heritage. This study focuses on companies that are medium-sized with between 20 and 99 employees or with assets of between US$500,000 and US$1 million.

The literature review describes HRM in Western and Indonesian contexts and also possible Indonesian cultural influences on HRM practices in Indonesia. Previous research has been dominated by studies on the adoption of sophisticated HRM practices by multi-national companies and attention is mostly focused on the influence of culture on the HRM strategies of big businesses. The literature review identifies a gap in the knowledge about the HRM practices of medium-sized enterprises in the Asia Pacific especially Indonesia. Recent research on the development of Indonesian HRM and has focuses on the adoption of strategic HRM practices as a course of action for solving companies’ problems after the Global Financial Crisis. However, these studies have not addressed the development of HRM practices in Indonesian medium-sized enterprises in the textiles industry.

This research uses a mixed methods approach to explore the HRM practices of medium-sized enterprises in the Textile Industry in Java, Indonesia. The research employs an exploratory sequential mixed method approach combining case study and survey methods. The philosophical paradigm of pragmatic realism that underlies the mixed method approach is examined and justified. Triangulation is enabled through the combination of case study and survey methods as well as through accessing other data sources such as company records. The multiple case study method was employed and four companies were examined. A survey was conducted to test the generalisability of the case-based findings.

The findings of the within-case analysis of each company and the cross case analysis confirmed that medium-sized proprietary limited (Pty. Ltd.) companies implemented formal HRM practices while family businesses had more informal practices. The characteristics of proprietary limited companies that differed from those of family business became the source of differences in HRM practices that is, formal organisational structures and clearer job description for each department. Furthermore, national and Javanese culture had a major influence on the companies’ HRM practices.

The case study findings and previous studies from the literature were then used in designing the questionnaire for the survey. Six hypotheses were also created to examine the relationships between HRM practices and culture and the company managers’ perceptions of performance. The first data collection yielded 228 responses (a response rate of 46.5%) and the second data collection which focused on proprietary limited companies, gathered data from 131 respondents (a response rate of 87.5%). The entire first survey findings from 228 respondents showed little evidence for the adoption of Western HRM practices. The disproportionate proportion of the family businesses compared to proprietary limited companies led to weak statistical results. Separate analysis of the family businesses (sample size: 147) also showed no empirical evidence of the adoption of Western HRM practices. However, analysis of the proprietary limited companies sample (81 respondents) indicated a significant positive relationship between the dependent variable of perception of company performance and the six independent variables of HRM practices including culture. This led to the decision to expand the number of proprietary limited companies in the sample and so additional data gathering occurred.

An analysis of proprietary limited companies using a larger sample (combined data - 209 respondents) confirmed the adoption of Western HRM practices. The correlations between each of the six independent variables and the dependent variable of perception of company performance showed positive results.The hypothesis testing was then applied only to the full sample of proprietary limited companies. The regression analysis generated a model that predicted company performance based on six independent variables of HRM practices and culture. The model suggested that four predictor variables (recruitment and selection, training and development, performance appraisal and industrial relations) significantly contributed to perception of company performance while the other two predictor variables (remuneration and rewards; and culture) did not.

Limitations of this study are concerned with the scope of the research which only covers a sample of firms in the textile industry in Java. HRM practices may be different in other industries and in other parts of Indonesia. Generalisations are therefore not made. Implications for practice include supporting family business to adopt more formal HR practices and record keeping. Finally, the findings of this study make important contributions to both research and practice. This study has contributed to the body of knowledge by enhancing our understanding of some medium-sized enterprises in Indonesia and their HRM practices which were found to be more developed in proprietary limited companies than in family businesses. This study has also added to the understanding of relations between the dominant Indonesian-Javanese cultural values and HRM practices in medium-sized companies in the textile industry.