Building Organizational Capacity For Rural Enterprise Management: A Study Of Government Agency Performance In Indonesia

Abstract

This study analyzes the organizational capacity of the Community and Village Empowerment Agency (DPMD) in managing Village-Owned Enterprises (BUMDes) in Takalar Regency, Indonesia. Employing a qualitative case study approach, this research examines five key dimensions of organizational capacity: human resources, infrastructure and technology, strategic leadership, management processes, and external networks. Data were collected through in-depth interviews with twelve participants comprising DPMD officials, village heads, and BUMDes managers, complemented by participant observation and document analysis. The findings reveal significant organizational capacity constraints that substantially limit BUMDes development effectiveness. Human resource analysis indicates critical shortages, with only three staff members managing 76 BUMDes without specialized personnel. Infrastructure and financial limitations create systemic barriers, as DPMD operates with minimal dedicated budget allocation for BUMDes development activities. While strategic leadership demonstrates commitment to rural enterprise development, management processes remain ad hoc due to resource constraints, and external networking lacks systematic coordination. These capacity limitations directly contribute to a 30.26% inactivity rate among BUMDes in Takalar Regency, indicating substantial performance gaps in village economic development. The research demonstrates that inadequate organizational capacity creates cascading effects that undermine sustainable rural enterprise development. This study contributes to organizational capacity theory by providing empirical evidence of capacity-performance relationships in rural development contexts. The findings have practical implications for policy makers and development practitioners seeking to enhance government agency effectiveness in supporting village economic development. Future research should examine organizational capacity development interventions and their impact on rural enterprise sustainability across different regional contexts.