23 Chapter II Literature Review This chapter consists of a theoretical background about the extent to which research on small industries in the islands has been carried out. Besides, this chapter also concentrates initially on providing an understanding of competitive advantage and sustainable competitive advantage in order as a basis for finding sources of competitive advantage for small industries on the island. Likewise, in this chapter State of the Art (SOTA) will be found to show the gaps of existing theories which will be filled in by this study. II.1 Island Entrepreneurs Like abundant pertains to the introduction, the author argues that the development of SMI in the island is not the same as in the mainland. This is in line with what was stated by Danson and Burnett that enterprises on Island be likely to face different, supplementary, and exaggerated problems (Danson and Burnett, 2014). Additionally, Baldacchino (1998) mention that the small island territory is not possible to follow the logic and perspectives of industrialization. Nowadays, a trend towards the interest in the study of entrepreneurship in rural areas is increased; however, relatively few have been written in a specific island environment (Danson and Burnett, 2014). Island by definition is ―a country or territory that is surrounded by ocean water and occasionally isolated in terms of language, which to some extent would imply cultural isolation‖ (Aubert et al. 2008). Danson and Burnett (2014) mention that ―islands are physically understood as entities set apart from other landmasses, and yet each is always bound into a relationship with their relative neighbors of either other islands or the mainland.‖ Meanwhile, Deschenes et al. (2004), adding that ―island is generally perceived as a small unit of land and surrounded by water.‖ More precise, Ozuem et al. (2015) adopted Hess (1990) define Small Island as ―that which is detached landmass with a surface area less than 10,000 km2 and a population of less than 500,000‖. Based on some of the above definitions, it could be concluded that island characteristic is surrounded by water, a small unit of 24 land, less of the population, to some extent quarantined in terms of language and culture but always bound into connection with their relative neighbors. This characteristic suitable to the island provinces in Indonesia, with averagely 85, 2 percent of the total area is sea area and averagely only 14, 8 percent of the total area is land area and surrounding by averagely 1.203 small islands, and some of it is inhabitants. More detail information in table II.1 as follows: Table II.1 Island provinces characteristics in Indonesia PROVINCES SEA AREA (%) a LAND AREA (%) a SMALL ISLAND AROUND a POPULATION 2015 b Bangka Belitung Island 79, 90 20, 10 950 1.370.331 Riau Island 96 4 2408 1.968.313 NTT 88 12 1192 5.112.760 NTB 85 15 864 4.830.118 Sulawesi Utara 78, 90 21, 10 668 2.409.921 Maluku 92, 96 7, 04 1422 1.683.856 Maluku Utara 90, 80 9, 20 1474 1.160.275 Sulawesi Tenggara 74, 25 25, 75 651 2.495.248 INDONESIA 64, 97 35, 03 17.000 255.182.144 a. bps.go.id b. Indonesia Inter- Cencal Population Survey 2015 Based on the bill on the acceleration of islands region development, which is planned to be ratified in the near future, the island regions is defined as an island province whose water area is larger than its land area, in which there are islands that form clusters into a single unit of geography, economy, politics, and socio- culture (Ministry of Law and Human Right, 2007). From 34 Provinces in Indonesia, there are only 8 islands provinces, characterized by islands, i.e., Bangka Belitung Island Province (water area: 75.80%; Land area: 24.20%; The number of islands: around 950); Island Riau Province (water area: 96%; Land area: 4%; The number of islands: around 2408); Maluku Province (water area: 92.96%; Land area: 7.04%; The number of islands: around 1422); Maluku Utara Province (water area: 90.80%; Land area: 9.20%; The number of islands: around 1474); Sulawesi Utara Province (water area: 78.90%; Land area: 21.10%; The number of islands: around 668); Nusa Tenggara Timur Province (water area: 88%; Land area: 12%; The number of islands: around 1192); Sulawesi Tenggara Province (water area: 74.25%; Land area: 25.75%; The number of islands: around 25 651) and Nusa Tenggara Barat Province (water area: 85%; Land area: 15%; The number of islands: 864) (Kurniawan et al., 2018). Performing the vision of ―Creating globally competitive small and medium industry (SMI)‖, the Directorate General of Small Medium Industry of Indonesia has a mission that in 2019 the distribution of SMIs development throughout Indonesia will be 60:40, with 60 correspond to the proportion of SMIs in Java Island (the centre of economy and government in Indonesia), and 40 correspond to SMIs outside Java Island. In 2014, the distribution of SMIs development in Java and outside Java is 64:36 respectively.