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.