Research on small industries is a very attractive theme for researchers today. However, the context of the islands is often missing from attention, even though there are thousands of small islands in the world, such as Indonesia, which consists of more than 17,500 islands, which to some extent, requires a different development approach with all the faced problems. The competitiveness index of Asia Competitiveness Institute 2015 indicates that island provinces, such as Bangka Belitung Island, Riau Islands, Nusa Tenggara Barat, Nusa Tenggara Timur, North Sulawesi, Maluku, North Maluku, and Southeast Sulawesi, need specific development strategies since they cannot be equated with the mainlands, such as Java and Sumatera, because their competitiveness rank is averagely low. The island entrepreneurs do not only face day to day deficiencies, but also to some extent, “comparative disadvantage.” That is why studying island entrepreneurs is essential, especially for an emerging country such as Indonesia, where impartial development is still a big issue. On the other hand, Indonesian Legal Law no.3/2014 regarding Industry instructed both Central and Local Government to realize the small and medium industries' competitiveness. Hence, this study revealed what strategies are suitable for developing entrepreneurship on the island as well as mapping out the main impediments that are the most challenging faced by island entrepreneurs. This research applies a mixed-methods approach and uses deductive and inductive reasoning because the mindset and the constructs are developed through literature review from previous studies as well as the in-depth interview results. The strategy for this research is the case study and survey. While the case study was conducted in the successful small manufacturing marine food industry in Bangka Belitung Island province, supplemented with small crafter firm and small agroindustry, specifically to explore knowledge management (KM) for a small firm on the island; meanwhile, the survey involved small-medium industry and government apparatuses in eight islands provinces in Indonesia. There are nine propositions constructed through literature review, which are then examined in this study through an in-depth interview. Then a factor analysis is carried out on the empirical findings from the interviews to get confirmation from the more significant respondents' of eight island provinces in Indonesia as well as to parsimony the empirical findings. Impediments surveys are carried out in stages, starting with the tabulation of impediments that are often faced by small firms, reducing it into 12 top impediments and then being re-surveyed on more significant respondents from the eight island provinces in Indonesia both from the perspective of the government and the island entrepreneur itself. As the results, there are 18 “have-to-do-lists” for the island entrepreneurs that are expected to become the incentive for small firms and the government in the effort to develop and strengthen the small firms in the island region. From the top 12 impediments based on the perceptions of both parties, is that there are eight impediments which have similarities with respect to each viewpoint even though the priority of scale is quite different and later becomes common ground. Also, there are eight impediments regarding which both parties have different views; this means that each party does not see what the other party perceives as their primary problem, and later this becomes a barrier to and challenge for the survival and thriving of island entrepreneurs. Then, the results of the two studies above, plus some normative sources, become the basis in developing a logic model regarding Island SMIs impediments and possible incremental solutions. Regarding KM practice for small firms on the island, through an in-depth interview with 12 small firms on the island, this research made effort to compile a theory building and contributed to two things, i.e. how to construct an affordable knowledge management system for small firms (emphasized on culture development), especially in the small island region, and when is the veracious time for the island entrepreneurs to innovate as a part of proactive action in business. Finally, the results of the factor analysis simplify the empirical findings into six new factors only that can generate competitive advantages for island entrepreneurs. This research aims to build a model of successful small firms on the island in order to provide insight for many stakeholders involved in the development of small industries on the island. The results of this study are expected to pave the way for the development and spread of small industries throughout Indonesia in order to achieve equitable development in this country. Simultaneously, through this research, it is expected that the awareness of researchers and related stakeholders to the context of the Island will increase. Lastly, the results of this study also might bring implications for further research, for example, to find out which factors (prudence, obedience, so-island, independent, cash in hand, and practical) are the most influential on the competitiveness of the island entrepreneurship, provided with related research to the sociology of small island societies will be a promising and useful future inquiries.