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CHAPTER II
LITERATURE REVIEW
2.1 Theoretical Description
2.1.1 Characteristics of Entrepreneurial Venture
O’Gorman (2001, p.60) stated that entrepreneurial venture growth is a result
of the strategic and structural choices made by an entrepreneur. In addition, the
entrepreneur’s role and capability are significantly needed to overcome barriers of
growth. The entrepreneur’s ability to eliminate the barriers means smoother and
higher growth can be achieved. Kuratko and Hodgetts (2001, p.40) indicated that
entrepreneurial venture is influenced by its entrepreneur, particularly the
entrepreneurial characteristics. The characteristics are :
• Total commitment, determination and perseverance
• Drive to achieve and grow
• Opportunity and goal orientation
• Taking initiative and personal responsibility
• Persistent problem solving
• Realism and sense of humor
• Seeking and using feedback
• Internal locus of control
• Calculated risk taking and risk seeking
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• Low need for status and power
• Integrity and reliability
Beside the above characteristics, etnocultural environment, circumstances in society
and a combination of these are influenced the entrepreneurial venture as well
(Lambing and Kuehl, 2000, p.15).
2.1.1.1 Entrepreneurial Venture Growth
“Growth is an opportunity to generate economics of scale and scope by performing larger amounts of work with proportionately less people.” (Roberts, 1999, p. 371). In addition, Roberts also explains that growth affects changes at the operating
level, organization level and staff level. At the operating level, growth can be
identified by adding new products, serving new customers and becoming active in
new geographic market. At the organization level, growth can be recognized by new
operating task with more work and more tasks to be managed. At the staff level,
growth exists when there are many new people to be managed.
Smallbone et al. (1995, p.44-46) explain that higher sales turnover and
consistent profitability are criteria of growth. It is indicated that putting more money
into start-up entrepreneurial venture is less cost effective than helping it to grow
faster. Moreover, there are four main types of growth process approach :
1. Personality dominated approaches, which focus on the impact of the
entrepreneur’s personal characteristics.
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2. Business management approaches, which emphasize the factors
affecting the firm’s performance in the marketplace, particularly its
financial performance.
3. Sectoral and broader market-led approaches, which emphasize the
influence of external factors rather than individual firm
characteristics.
4. Organizational development approaches, represented by the so-called
“life-cycle” or “stages of growth” models.
In the essence, growth measurement is still unstandardized. It looks different
and varied on one venture to another, one enterprise to another and one industry to
another.
“No single measure of growth appropriate for all businesses” (Tomasko, 1996, p.225).
Measurement of growth is relative to the object of measurement. Therefore, there is
no exact method in achieving goals of growth measurement in any particular
organization.
2.1.1.2 Growth Identification
“Every business has a natural rate of growth. If that rate is not reached, a business can shrivel. If it is surpassed, the business struggles to keep pace. One of the most important functions of the founder/manager of any business is sensing what that “inherent” growth rate should be, and adhering to it. The founder’s job is not to lead the “troops” to new heights. Rather, it is to draw out and moderate the changes that will be required of everyone as the business grows.” (Hawken, 1988, p.92).
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Further more, Hawken explained that healthy growth is important for any
ventures. It is not related to how fast the growth can be or How much money is
available. The healthy growth must be able to be monitored and meted out.
Aaker (1992, p.225) stated that an objective of most organisation is to grow,
in term of sales, values added, profits, personnel and resources. In addition, it is
indicated that there are two types of growth strategies for new markets in present
products :
1. Expanding geographically,
Geographic expansion may involve changing from a regional
operation to a national operation, moving into another region, or
expanding to another country.
2. Expanding into new market segments,
A firm can also grow by reaching into new market segments. There
are, of course, a variety of ways to define target segments and
therefore growth directions :
a. Usage. The nonuser can be an attractive target.
b. Distribution channel. Opening up a second or third channel
of distribution.
c. Age. Concerning on age classification.
d. Attribute preference. Extending service line to segments
which demand it.
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Although growth can be recognized in common ways, there are still some
fallacious understanding of growth. Meyer, P. (2000, p.4) indicated that there are
four fallacies of growth. First, assuming ability to grow is out of an operational
problem. Operational problem need to be corrected earlier otherwise it will become a
barrier to growth. Second, assuming growth equals to profitability. Growth does not
create profitability, it may be a trade-off that reduce profit to get revenue. Third,
assuming profitability improves when every customer are on hand. Getting extra
customers usually costs more than it did to get the original customers. Fourth,
assuming growth will be a benefit for customers. One common mistake growing
companies make is to become very self-focused. The success is so intoxicating that
the company starts to boast about growth to customers, treating it like a benefit that
customers will enjoy.
2.1.2 Internet Service Provider in Indonesia
Indonesian Internet Service Providers (ISPs) have grown from 50 companies
with 256,000 subscribers in 1999 to 180 companies with more than 4 millions
Table 2.1 Registered Provider
1999 2000 2001 2002 ISP 50 139 172 180 NAP - 5 16 18
MULTIMEDIA 8 18 24 24
Source : WWW. APJII. OR.ID
10
020406080
100120140160180
Number of Provider
1999 2000 2001 2002
Year of Establishment
Registered Provider
ISPNAPMULTIMEDIA
Figure 2.1 Registered Provider
subscribers in the first quarter of 2002 (APJII Statistical Report, 2003). It shows that
more than 23% subscriber growth each year during 1999-2002.
Table 2.2 Internet Subscriber and User in Indonesia
Year Subscriber User 1998 134.000 512.000 1999 256.000 1.000.000 2000 400.000 1.900.000
581.000 4.200.000 2002 658.192 4.500.000 2003* 800.000 7.550.000
2001
t* es imation to the end of year 2003
Source : WWW. APJII. OR.ID
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010000002000000300000040000005000000600000070000008000000
Number of People
1998 2000 2002
Year
Internet Subscriber and User in Indonesia
SubscriberUser
Figure 2.2 Internet Subscriber and User in Indonesia
2.1.2.1 Indonesia Status on Internet Development
Status on Internet development in Indonesia published in International
Telecommunication Union website (ITU.org) :
• Lacking of investment to develop telecom infrastructure.
• Low density, totally 7 million lines. Three percent ( 3% ) of the total
population or 3 phone lines per 100 people.
• Most lines are concentrated in cities.
• Major population does not have opportunity to telephone and
information access.
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• There is a need to invite foreign investor to participate in
telecommunication development.
• Toward open market, Government has made some steps to reform
telecommunications sector.
2.1.2.2 Internet Potential Users in Indonesia
Indonesia population is more than 200 millions people (BPS.go.id), the fifth
largest in the world and the third largest in Asia. Based on International
Telecommunication Union report (ITU.org), Internet potential users in Indonesia is
estimated to 61 millions of users, which is more than 30% of the population.
Table 2.3 Potential Internet Users in Indonesia
No. Potential Internet Users in Indonesia Quantity (millions)
1. Telephone / Internet cafe 30 2. Universities 3 3. Specialized High School (SMK) 4 4. High School (SMU) 7 5. Pesantren (religious boarding school) 7 6. Business / offices 10
Total Potential Users 61
Source : WWW.ITU.ORG
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Potential Internet Users in Indonesia
50%
5%7%11%
11%
16%
Telephone / Internet cafe
Universities
Specialized High School(SMK)High School (SMU)
Pesantren (religiusboarding school)Business / offices
Figure 2.3 Potential Internet Users in Indonesia Moreover, the Internet users can be categorized into five sectors, public
Internet kiosk, office, residential, campus and school. The biggest portion is from
public Internet kiosks sector, the smallest portion is from schools sector.
Table 2.4 Composition of Internet Users in Indonesia
No. Composition of Internet Users in Indonesia Percentage (%)
Public Internet Kiosks 43 2. Offices 41 3. Residential 12
1.
4. Campuses 3 5. Schools 1
Total Users 100
Source : WWW.ITU.ORG
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43%
41%
12%3%1%
Public Internet Kiosks Offices Residential Campuses Schools
Figure 2.4 Composition of Internet Users in Indonesia
Based on the data, we found that the existing telecommunication
infrastructure in Indonesia, the main ISP infrastructure, are not able to keep up with
the growth of Internet demand. As the result, finding an alternative infrastructure
solution is a need.
2.1.3 Internet Service Provider Infrastructure Characteristics
Burris (2002, p.29) wrote service provider infrastructure need to be scalable,
flexible, dependable, supportable, secure and manageable. These characteristics are
needed throughout the delivery chain from service origination through the final
customer.
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1. Scalability.
The infrastructure must seamlessly scale quickly to reflect user growth
and volumes. Central to scalability are power, space, bandwidth,
hardware/software, and the environmental of the data center.
2. Flexibility.
The infrastructure must be adaptable to a given technical condition
without sacrificing integrity and reliability. Service providers have no
technically worry about connecting to the existing system and how to
reach customers regardless of how big and complicated the existing
system is and how many customers to serves.
3. Dependability.
Dependability extends beyond the equipment in the data center to the
actual building and all elements between the service provider and the
end-customer. End-to-end Service Level Agreement (SLA) must take into
account the weakest link in this chain and service level will reflect this.
4. Supportability.
Supportability goes hand-in-hand with dependability and manageability.
Infrastructure needs to have patches and updates installed promptly and
proactively. Resources need a training program so they are able to support
updates to the service provider’s infrastructure.
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5. Security.
Security takes into effect physical and electronic security. Customer
require guarantees that firewall are solid and intrusion detection methods
are reliable. Building and cage security must be total.
6. Manageability.
Complete monitoring of a customer’s service is of prime importance.
Proactive notification of service outages is becoming a requirement of
many customers because service outages affect revenues. Service
providers manage their infrastructure by using hardware, software, and
operations centers.
2.1.4 Wireless Internet Service Provider
Indonesia Wireless LAN Internet Association (IndoWLI) indicated a
definition of Wireless Internet Service Provider (Wireless ISP) is an Internet Service
Provider that utilise fixed wireless access as its communication infrastructure.
Further more, Wireless Internet Service Provider Association basically describes a
Wireless ISP must be equipped with an access point, an antenna, and optionally an
amplifier at the main Wireless Point of Presence (WPOP). The access point will just
plug right into your existing network via Ethernet (WISPA.org).
Purbo, Onno W. (2003, p.9) indicates some reasons of why using fixed
wireless access as an Internet Infrastructure, such as :
1. Cost effective, when it is compared to dial-up cost.
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2. Ease of deployment, installation and operation.
3. High capacity of bandwidth.
4. Wireless products is a mass products that easily to search out in market
place.
More over, Wireless ISP can be categorised as a new Internet business model.
A new model that utilises a new telecommunication technology, Fixed Wireless
Access technology.
2.1.4.1 Wireless ISP Structural Components
Based on PT. ICHTUS Gala Asia, a wireless solution provider, annual report
(2003, p.10), it is clearly explained that Wireless ISP technically consist of active and
passive components. All of wireless components are set on ISP site and client site
similarly. The components are listed as follow :
a. Access Point.
b. Antenna.
c. Amplifier (optional).
d. Surge Arrester.
e. Cabling System.
f. Accessories.
An Access Point (AP) is an active component. Its function is to transmit
signal and receive to or from other associated access point. The receiving signal is
conveyed to a hub or a switch via a Untwisted Pair Cable (UTP) cable. To transmit
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signal, an AP connect to a detachable antenna. On the Wireless ISP site usually
omni-directional antenna is used, while uni-directional antenna is used on the client
site. Protecting all components from lightning strike, surge arrester is attached
between the AP and antenna. Beside equipped with high resistance fuse to barely
block thousand volts of lightning strike, the surge arrester can be grounded to a
common electrical ground to minimize the striking effect. AP, Antenna and surge
arrester are hooked by Radio Frequency (RF) Coaxial Cable. All cables are
assembled with connectors at both ends. In deploying all of the wireless components
on a tower or pole, accessories like, clamp, cable ties, mounting bracket are needed.
An amplifier will be required if the transmitting signal is not strong enough to reach
a destination site. Normally, an Wireless ISP can reach any particular destination in
5KM radius without adding an amplifier.
From Wireless ISP site, the signals are broadcasted to all clients. It is called
point-to-multipoint bridging configuration. In the new product version, the
configuration is not simply in bridging configuration, but alterable to routing
configuration. In all configuration, the active client will reply and utilise the
transmission process in sending and receiving data. In this term, a heavy-loaded
client will utilise more capacity than a less-loaded one.
Basically, a Wireless ISP is able to serve its customer as long as it is in Line
of Sight (LOS) condition. It means there is good clearance and no obstacle from the
ISP to the client site. If it is not LOS than a repeater is used to relay the signal.
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Line of Sight
Line of Sight
ICHTUS Gala AsiaMutual Growth
ICHTUS Gala AsiaMutual Growth
Wireless ISP Configuration
Configuration : Wireless ISP
Designed by :
Indonesia Consulting DivisionPT ICHTUS GALA ASIACentral Greenville no. 2B, Jakarta 11510Ph : 62-21-560-3579; Fax : 62-21-563-3276
Wireless ISP
IBM Compatible-Client
IBM Compatible-Client
Server
IBM Compatible-Client
Hub
Radio tower
Omnidirectional 15dBi/8dBiKG2415/KG2408
Lightning ArrestorKGLN
Heliax Cable 1/2 inch 50
SMA to N TypeKCA-SN
MAP811
IBM Compatible-Client
Server
IBM Compatible-Client
Hub/Switch
Radio tower
Subscriber Site
Unidirectional 27dBi/24dBi/19dBi/15dBiKG2427/KG2424/KG2419/KG2415
Heliax Cable 1/2 inch 50
Lightning ArrestorKGLN
SMA to N TypeKCA-SN
MAP811
IBM Compatible-Client
Server
IBM Compatible-Client
Hub/Switch
Radio tower
Subscriber Site
Unidirectional 27dBi/24dBi/19dBi/15dBiKG2427/KG2424/KG2419/KG2415
Heliax Cable 1/2 inch 50
Lightning ArrestorKGLN
SMA to N TypeKCA-SN
MAP811
Figure 2.5 Wireless ISP Configuration*
*Permitted by PT ICHTUS Gala Asia
Source : PT ICHTUS Gala Asia
2.1.4.2 Wireless Internet Service Provider in Indonesia
In Ichtus’ annual report (2003, p.5), Wireless ISP is started within year 1999
to 2000. At present, it exists in 9 big cities : Medan, Jakarta, Bandung, Semarang,
Jogjakarta, Surabaya, Denpasar, Pontianak, Makasar. As observed , at least there is
one Wireless ISP on the cities. In addition, the basic and common reason for an ISP
using Fixed Wireless Access is affordability.
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Other than Wireless ISPs, the existing conventional ISPs are starting to use
Fixed Wireless Access (FWA) to serve their customers. Formerly, The conventional
ISP is the ISP that solely rely on wired infrastructures, such as leased line, ISDN and
Frame Relay. Now most of the conventional ISPs dominantly offer wireless
connection to their corporate customers. In addition, Incumbent Local Exchange
Carrier (ILEC), as a major player in telecommunication infrastructure and internet
access in Indonesia, also start moving aggressively on wireless services. Obviously,
ISPs in Indonesia do not solely compete on their conventional Internet access
solution anymore, but also in wireless solution as well. Therefore, sometimes it is
vague to determine whether it is a wireless ISP or not.
2.1.5 Fixed Wireless Access
Based on the definition in Webopedia (Webopedia.com), Fixed Wireless
refers to wireless devices or systems that are situated in fixed locations, such as an
office or home, as opposed to devices that are mobile, such as cell phone. Fixed
wireless devices normally derive their electrical power from utility mains, as opposed
to portable wireless devices that normally derive their power from batteries.
The point-to-point signal transmissions occur through the air over a terrestrial
microwave platform rather than through copper or fiber cables; therefore, fixed
wireless does not require satellite feeds or local phone service. The advantages of
fixed wireless include the ability to connect with users in remote areas without the
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need for laying new cables and the capacity for broad bandwidth that is not impeded
by fiber or cable capacities.
Geier (1999, p.47) indicates there are two technologies imply in Fixed
Wireless Access, Frequency Hopping and Direct Sequence. Both technologies used
in Wireless LAN, Wireless WAN and Wireless MAN configuration. Wireless LAN
is Local Area Network (LAN) connected using share microwave medium to transmit
and receive data. Wireless WAN is Wide Area Network connected using share
microwave medium to transmit and receive data. Wireless MAN is shorted from
Wireless Metropolitan Area Network. Purbo (2003, p.159-174) indicates that
Wireless MAN is deployed scattered within a city in a mesh configuration.
2.1.5.1 Fixed Wireless Access In Indonesia
According to Purbo, Onno W. (2003, p.9), one of the Indonesian leading
intellectual who is struggling for a fair frequency regulation, Most of Fixed Wireless
Access (FWA) equipments used in Wireless ISP in Indonesia, are under Wireless
Fidelity (WIFI) standard. WIFI standard is adopted from Institute of Electrical and
Electronics Engineers, Inc. (IEEE) 802.11 standard. IEEE is a non-profit, technical
professional association.
Indonesia Wireless LAN Internet Association (Indowli) indicates there are
two types of fixed wireless access technology that are very popular in Wireless ISP
in Indonesia, Frequency Hopping Spread Spectrum and Direct Sequence Spread
Spectrum (Indowli.or.id).
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Both technologies have their own uniqueness. Frequency Hopping Spread
Spectrum provides greater immunity against interference but lower bandwidth, on
the other hand, Direct Sequence Spread Spectrum generate higher bandwidth but
more sensitive to interference.
2.1.5.2 Frequency Hopping Spread Spectrum
In webopedia.com, Frequency Hopping Spread Spectrum (FHSS) can be
defined as follow, FHSS is one of two types of spread spectrum radio. FHSS is a
transmission technology used in LAWN transmissions where the data signal is
modulated with a narrowband carrier signal that "hops" in a random but predictable
sequence from frequency to frequency as a function of time over a wide band of
frequencies. The signal energy is spread in time domain rather than chopping each bit
into small pieces in the frequency domain. This technique reduces interference
because a signal from a narrowband system will only affect the spread spectrum
signal if both are transmitting at the same frequency at the same time. If
synchronized properly, a single logical channel is maintained.
The transmission frequencies are determined by a spreading, or hopping,
code. The receiver must be set to the same hopping code and must listen to the
incoming signal at the right time and correct frequency in order to properly receive
the signal. Current FCC regulations require manufacturers to use 75 or more
frequencies per transmission channel with a maximum dwell time (the time spent at a
particular frequency during any single hop) of 400 ms.
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Based on Ichtus’ annual report (2003, p.50), it is mentioned that there are
several FHSS products in Indonesian market, for example : Alvarion, Raylink and
Cirronet.
2.1.5.3 Direct Sequence Spread Spectrum
In webopedia.com, Direct Sequence Spread Spectrum (DSSS) can be defined
as follow, DSSS the other type spread spectrum radio. DSSS is a transmission
technology used in LAWN transmissions where a data signal at the sending station is
combined with a higher data rate bit sequence, or chipping code, that divides the user
data according to a spreading ratio. The chipping code is a redundant bit pattern for
each bit that is transmitted, which increases the signal's resistance to interference. If
one or more bits in the pattern are damaged during transmission, the original data can
be recovered due to the redundancy of the transmission.
Based on Ichtus’ annual report (2003, p.50), there are several DSSS products
in Indonesian market, for example : Macrostack, Proxim and Cisco.
2.2 Conceptual Framework
The research encircles technology and business area. Focusing on the
relationship of technology and business. Also, finding the impact of technology to a
business model. Precisely, a particular technology that drives growth to a specific
internet-based business model.
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TechnologyA Specific
Internet-basedBusiness Model
IMPACT
Figure 2.6 Conceptual Framework Diagram
The Internet business model is selected among the emerging internet-based
business models in Indonesia. As a result, the selection comes to an entrepreneurial
ISP business model. The technology is selected among the emerging technologies
utilized by ISPs in Indonesia. Thus, it comes to Fixed Wireless Access technology,
which is relative new and popular.
There are so many impacts of technology to a business model. Specifically, a
technology could drive many positive or negative results to an entrepreneurial ISP
business. However, the most important impact that are desired and required by all
business models is a growth. Therefore, the framework can be extracted to a specific
logical thinking.
Fixed WirelessAccess
EntrepreneurialWireless ISP
Growth
IMPACT
Figure 2.7 Extracted Framework Diagram
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2.3 Hypothesis Research
Associating with the related theory and referring to the research questions, the
following research hypothesis are raised to obtain adequate results.
• Hypothesis 1 : There is a relation between Fixed Wireless Access
characteristics and entrepreneurial Wireless ISP growth.
• Hypothesis 2 : Fixed Wireless Access scalability has significant
impact to the entrepreneurial Wireless ISP growth.
• Hypothesis 3 : Fixed Wireless Access flexibility has significant
impact to the entrepreneurial Wireless ISP growth.
• Hypothesis 4 : Fixed Wireless Access Dependability has significant
impact to the entrepreneurial Wireless ISP growth.
• Hypothesis 5 : Fixed Wireless Access Supportability has significant
impact to the entrepreneurial Wireless ISP growth.
• Hypothesis 6 : Fixed Wireless Access security has significant
impact to the entrepreneurial Wireless ISP growth.
• Hypothesis 7 : Fixed Wireless Access manageability has significant
impact to the entrepreneurial Wireless ISP growth.