International Journal of Social Science Studies Vol. 5, No. 6; June 2017 ISSN 2324-8033 E-ISSN 2324-8041 Published by Redfame Publishing URL: http://ijsss.redfame.com 21 Strategy and Innovation of Mushroom Business in Rural Area Indonesia: Case Study of a Developed Mushroom Enterprise from Cianjur district, West Java, Indonesia Rendi Febrianda 1 , Hiromi Tokuda 2 1 Graduate School of Bioresources, Mie University, Japan 2 Bioresources Faculty, Mie University, Japan Correspondence: Rendi Febrianda, Graduate School of Bioresource, Mie University, Tsu City Kurimamachiyacho 1577, Mie Prefecture, Japan. Received: March 27, 2017 Accepted: May 8, 2017 Available online: May 13, 2017 doi:10.11114/ijsss.v5i6.2304 URL: https://doi.org/10.11114/ijsss.v5i6.2304 Abstract Mushroom farming has become attractive business in agricultural sector due to its simplicity and flexibility of cultivation and quite profitable. Health awareness of Indonesian people about mushroom gives a positive impact to mushroom business. Behind the good aspects, several evidence argued that production performance of mushroom business is not optimal related to less capacity and deficiently appropriate knowledge. This paper aims to learn the unique strategy and innovation from local mushroom enterprise which is very famous in Cianjur distric, West Java, Indonesia in order to improve the business performance. Using technological (innovation) approach and qualitative method, this study concluded that there are two types of strategies, one relating to the technological part, and the other relating to the organization part. The technological focuses on attracting market and enhancing the yield productivity. The organization part focuses on developing capacity to fulfill the demand by making a contract agreement resembling contract farming with local society. For local society, the contract agreement has benefit to minimize both market failure and production problems under supervison support and without monopoly action. The strategies were capable of being successful innovation by interacting and cooperating with external sources, and performing certain adjustment with local condition. Keywords: mushroom farming, mushroom enterprise, mushroom business, innovation, contract farming 1. Introduction The growth of urban areas results in not only urbanization movement, but also in the tendency of workers moving to urban areas, withdrawing from the agriculture sector. This is a common phenomenon seen in Indonesia. One of the agricultural commodities which can be considered quite promising in Indonesia is mushroom, in which many mushroom producers turn into potential Small and Medium Enterprises (SMEs). Belonging to vegetables category, mushroom is valued for its high quality protein, excellent unsaturated fatty acids, high content of some vitamins, highly tradable commodity and the advantage of short harvesting periods as well as easy-to-use technologies (Marshall & Nair, 2009 ; Amuneke et al., 2011). Despite the Indonesian society’s awareness of health be nefits of mushroom has resulted in the positive progress of the commodity, its demand is not responded optimally owing to problems related to the performance of mushroom SMEs (Nugroho, 2013). From Food and Agriculture Organization (FAO) data, national production of mushroom in Indonesia still reveals a positive trend even though it is fluctuated, as figure 1 shows. West Java province occupies the first rank of national mushroom production by total 25,194,471 Kg or 67 % of national production in 2014 (Kementerian Pertanian, 2015). Cianjur as a well-known district located in the West Java Province Indonesia, is considered as the central area for mushroom production. The district has 350.148 hectares of total area in which 62.99% of the population employed in the agricultural sector (Badan Pusat Statistik Kabupaten Cianjur, 2015). Cianjur district is currently famous for not only its fragrant rice but also its mushroom production. Most of Cianjur distric are mountainous areas and indeed fit with mushroom’s natur al habitat. However, natural condition is not sufficient from the business perspective. For increasing the yield, an appropriate method is important, while for business development, an appropriate strategy and innovation is essential.