Exploratory Study of Co-location in Value Creation and Capacity Building: A Case Study of SMEs in the Mobile Device and Culinary Business Sector in Padang City, Indonesia

Abstract

Aims: While the benefits of co-location for SMEs are widely acknowledged, the specific mechanisms through which value is created and capacity is built often differ across sectors, a gap this study addresses. This research comparatively analyzes how co-location influences value creation and capacity building among Small and Medium Enterprises (SMEs) in Padang City’s mobile device and culinary sectors. Study Design: A qualitative, exploratory case study was employed. Place and Duration of Study: The research was conducted between May and July 2025 at two key sites in Padang City, Indonesia: Plaza Andalas, the city's main hub for mobile device SMEs, and GOR Haji Agus Salim, a central hub for the culinary sector. Methodology: Data was collected via semi-structured interviews and direct observations with ten SME owners or operators, with five from each sector. The data was analyzed using thematic and comparative analysis to identify and contrast key patterns. Results: Both sectors leverage a co-location "destination effect" for high customer traffic, but their value creation strategies diverge. In the mobile device sector, where products are standardized, value is created not from the product itself but through intangible assets like superior customer service and technical expertise. Consequently, their capacity is built within a "co-opetitive" environment through rapid observational learning to replicate competitor strategies. In contrast, the culinary sector functions as a community-based ecosystem where value is directly tied to the tangible quality of the product,superior taste and unique recipes. Their capacity building relies on social networks and informal peer-to-peer knowledge exchange. Despite these differences, the key finding that unites them is a significant gap stemming from the lack of formal business training received by the entrepreneurs. This is critical as, according to the literature, skills and training are a fundamental factor in capacity building.