Journal of Economics and Sustainable Development www.iiste.org ISSN 2222-1700 (Paper) ISSN 2222-2855 (Online) Vol.5, No.9, 2014 49 The Influence of Environment and Entrepreneurship Factors toward the Farming Performance (Case on Manager Farmers of Cloves Plantation in Buleleng Regency, Bali Province) Gede Mekse Korri Arisena 1* , M. Muslich Mustadjab 2 , Budi Setiawan 2 , Djoko Koestiono 2 1.Doctoral student of Agriculture Science Program, Major in Agriculture Economic, Faculty of Agriculture, University of Brawijaya, Indonesia. 2.Faculty of Agriculture, University of Brawijaya, Indonesia E-mail of the corresponding author: arisenakorri@yahoo.co.id Abstract The aims of this research are to analyze the influence of the physical and economic environments toward the entrepreneurship of farmers and farming performance then to analyze the influence of the entrepreneurship of farmers towards farming performance. This research is conducted in Buleleng Regency as the largest producer area of cloves in Bali Island. Three villages selected as location that representing the Buleleng Regency. Farmers sample determined at each village with simple random sampling method. The analysis method that used in this research is Structural Equation Modelling (SEM) with four latent/unobserved variables. The result of this research shows that the physical and economic environments influence on entrepreneurship of farmers with different direction. The physical environment has negative influence on entrepreneurship of farmers, while the economic environment has positive influence towards entrepreneurship of farmers. Physical and economic environments have no influence towards the farming performance, but the physical and economic environments have indirect influence on farming performance through entrepreneurship. This is means that the higher value of the physical and economic environments, the higher value of farming performance, if the value of entrepreneurship also high. The entrepreneurship has positive influence on farming performance. Keywords: physical environment, economic environment, entrepreneurship, farming performance 1. Introduction For Indonesia, the clove is one of the agricultural commodities that have high economic value and strategic because this commodity is a mixture of cigarette manufacture, drugs and essential oil. Cigarette industry that the mostly raw materials use clove, this matter is proved in 1998, that this industry is able to survive to face the economic crisis that hit Indonesia that time. This situation encourages the rapid growth of the new cigarette industries. In 1999, no less than 70 mills have contributed to the new players in the cigarette industry in Indonesia. This effected on the increasing of primary raw materials need, which is cloves. The need of clove commodity that rapidly growth and start to improving the sales price of cloves which reached IDR 98,000 per kg by the end of 2010 is an opportunity for the farming development of clove in the country. This opportunity must be accompanied by improving the farming performance of cloves commodities through the efforts of business environment improvement, which is the improvement of the economic and physical environments of cloves commodities. The efforts to improve the physical and economic environments clove commodity would not work if the clove farming is still managed by farmers who do not have the entrepreneurship competence. The paradigms of farmers’ behavior today still consider that farming of clove commodity is a production business, which serves only to produce as much. Market, marketing, and processing of agricultural products are beyond the reach of their business concerns, which resulted in very small opportunity of farmers for creativity and initiative in making decisions. Optimizing the clove farming as a business that produces a product that has economic value and provide the maximum income for farmers, requiring farmers who have entrepreneurship competencies that farmers who have the motivation, innovation, managerial competence and courage to take the risks. One of the clove production centres in Bali Province is Buleleng Regency. The cloves farming in Buleleng Regency is a little bit different from the picture in the general agriculture in Indonesia that have constrained by the narrowness of the average land holding. On the cloves farming in Buleleng Regency encountered many family farm that has mastery of the extensive farming area. Physical and economic environments which is an indicator of the business environment, very supportive of commodities cloves farming in Buleleng Regency, but the support of physical and economic environments of commodities cloves farming in Buleleng Regency was not followed by an increase in entrepreneurship farmers. The average of entrepreneurship farmers level is still low, it is seen from the low motivation, lack of innovation, the courage level to take the risk is low and it has not been an unqualified farmers who can manage the farming