Comparative Analysis Of Small Medium Enterprise Profitability Based On Its Ownership Form And Etl micity : Study On Automotive Sector In Yogyakarta

Tujuan penelitian mi adalah untuk mengetahui (pakah terdapat perbedaan operatingprofitmar^n, netprofitmargin dan return on investment antara pengusaha Jaiva dengan Tionghoa, dan bentuk sole proprietorship dengan partnership. Jjokxist penelitian dilakukan di Yogyakarta pada perusahaanperttsahan skala kecil dan menengah yang bergerak dalam bisnis otomotif sukucadangmobildanbengkel Variabel independent dalam penelitian ini adalah operatingprofit mar^n, net.profit margin dan return.on investment, sedangkan tiagk'at keuntunganyang dperoleh mertpakan variabel dependen. Setiappo] mlasi diambil sampelnya untuk membandingkan netprofit margin dan return on investment. Sampel penelitian dibafi menjadi dua kelompok yaitu berdasarkan bentuk kepemilikan dan etnis. Kpemilikan dibagi menjadi dua bentuk,yaitu soleproprietorship danpartnership. 'Etnispemilik dibagi menjadidua,yaituJam dan Tionghoa. XJji Statistik yang digunakan adalah independent sample karena data yang di^nakan berdistribus normal Hasil pen t-test litian menjelaskan bahm terdapatperbedaanyang signifikan antara peng. tsaha Jam dengan Tionghoapada operatingprofit margin, netprofit margin, dan return on investment. Temuan laitya adalah bentuk sole proprieti ^rship dengan bentuk partnership memiliki perbedaan yang signifikan pada operatingprofitmargtt, netprofitmargin, andreturn on investment. keywords :small medium enterprise, sole proprietorship andpart wrship, net ĵrojit margin, return on investment. Dosen Fakultas Ekonomi UH


Introduction
The global crisis.in2008 has driven the developing countries to be more precautions in.investing in securities.The developing countries does not intended for their economy to be influenced by securities.The investment in real sector is prioritized to strengthen the fundamental of a country.Based on World Bank data, see figure 1, SME has significantly contributed to employment and gross domestic products (GDP).Therefore, every developing country's government attempt to develop SME through several ways such as training, funding for free or in the form of loan, and others.Onugu (2005) explained SMEs have played and continue to play significant roles in the growth, development and industrialization of many economies the world over.Fadhil (2010) explained SMEs have been very important in many countries including Malaysia becauseof its role for the country"s economic growth.Indonesia government play a major enroll in developing SME in Indonesia to building strong and firm national economy.The government role is to encourage the private sector together in SME activity.This can be seen by the increasing number of financial organization such as bank and non-bank in providing loan to the society in running SME business.The government also encourages the educational institution in developing and creating human resources that are ready to be an entrepreneur.The fact that in the past three years Indonesian economy has developed positively, and manages to be in the third rank after China and India.Other than that, in table 1 describe the growth of SME in Indonesia.These data indicate the,increase in number of S vfE from year to year, and it was predicted that this year it reached more than 20million  Moreover, this research will compare the SME's profitability between proprietorship and partnership.This research is done to describe wl ether the SME with partnership is better in providing profit than proprietorship.The previous research done by Onugu (2005) stated that there is a s.gnificant difference of SME in the form of partnership which has greater p 'ofit than proprietorship.In Indonesia, SME in the form of partnership is more than proprietorship; therefore this research will support the previous reseirch.The researcher motivation in doing this research isthat SME is the trending topic in Indonesia.

Problem Identification
Based on the explanation above, in this research there arj several questions that should be discussed, such as:.
1. Are there any significant difference in profitability between SME of Javanese entrepreneur and Chinese entrepreneur?
2. Which has better average profitability between Javanese entrepreneur and Chinese entrepreneur?
3. Are there any significant difference in profitability between SME in the form ofproprietorship and partnership?
4. Which has better average" profitability between SME in the form of proprietorship and partnership?
Literature Review 1. Small Medium Enterprise Turan dan Urkmez (2010) explained that different countries have different SME definition; however the important consideration is the number of employee, asset, and income.In Indonesia, the definition of SME based on Act Number 20/2008 is the enterprise in the form of sole proprietorship and partnership with the total assets of Rp 50 million-Rp 10 billion, annual income of Rp 50 million -Rp 50 billion, and maximum number of employees is 300 people.Radam et al (2008) explained An enterprise is considered as an SME based-on the annual sales turnover or number of full-time employees.An SME in the manufacturing sector is defined as an enterprise with full-time employees not exceeding 150 employees or with annual turnover not exceeding RM25 million.According to Small and Medium Industries Development Corporation (SMIDEC), SME is defined as the enterprise that with fiill time workers less than 75 employees or tlie share holder's capital is no-more than M $ 2.5 million.
Based on SMIDEC, SME defined into two, which are: a. Small Industry (SI), with the number of employee of 5 -50 people or the share capital with no more than M $ 500 thousand.b. 2. Medium Industry (MI), with the number of employee of 50 -75 people or the share capital betweenM $ 500 thousand-M $ 2.5 million.Sole proprietorship is a business or enterprise that owned and managed by one person and bares all the responsibility and risk.While partnership is the relationship between two or more people and they agree to share profits and risks that attached on their business (Onugu, 2005).The advantages of each type of ownership are as follows: 'ArifSingapurwoko, CompmtiveAnalysis Of Small Medium Enterpri^, a.
bi Ethnicity I Suryadarma et al (2006) describe ethnicity as the fimdamental factor in the human society where culture, language, religion, behavior, and biological traits affect behavior or way of working.Indonesia comprise of many ethmcs, Suryana et al ( 2006) research found that four ethnics dominate ircome and population in Indonesia, which areJavanese, Malay, Bugis, and Chinese.Butler andHerring (1991) explained thatetlmic migrants group hasbetterpossibility to rim a business than local ethnic.In this research the local ethnii group is Javanese as the Chinese as the ethnic migrants.Javanese ethnic is tte majority population that lives inJava island, while Chinese isthe people that :ame from China and stayed in Indonesia or bom in Indonesia and has descer|,dant from Chinese.

Financial Performance
Several researcher uses profitability as the performance meas Sole Proprietorship : Easy to form and wind up, direct motivation, quick decision and prompt action, bettercontrol, maintenance of business secrets,, close personal relation, flexibility in operation, encourajge self-em iloyment.Partnership: Easy to form, availability of large resources, better decisions, flexibility in operations, sharing risks, protection of interest of each partner, benefits ofspecialization.irement in determining the good and bad SME.The previous research has been done by Hudson et al. (2001), Onugu (2005), Ntalakas et al. (2006), andLo(ke (2006).Hudson et al. (2001) uses cash flow, market share, overhead cost reduction, inventory performance, cost control, sales profitability, efficiency, a id product cost reduction as the financial performance.According to tl em, sales profitability and market share is the best measurement in determming SME performance.Onugu (2005) argues that his research uses operajting profit rhargin as the best Way to measure profitbecause it does not consider whether the SME uses debt or capital in financing the business.Ntalakas ec al. (2006) stated that the best measurement is to refer to Balance Scorecard.m financial perspective, the best measurement is retum on investment.Locke (^2006) also stated the retum on investment with net profit margin, debt ratio, and inventory turnover is the best combination to measure fmancial performance of SME.
Net Profit Margin Brigham and Houston (2004) described that net profit mar the level of the company's ability generate profit in every sales lligher the net profit margin, the better the company in generating gii indicates ^alue.The Drofit This ratio is suitable in SME because the main income of SME isthe product sales or services.The net profit margin formula is as follow; : .
Net Profit Margin = Operating Profit Margin Brigham and Houston (2004) described that operating profit margin is a tool to measure the company's ability to generate profit where it uses income before interest and fax.This ratio is suitable to determine the SME ability evenly regardless the company capitalize it using debt or without debt.The operating profit margin formula is as follow: Operattng Profit Margin =

Return on Investment
The profitability ratio as a proxy of financial performance is widely used in several researches.The increase in profitability ratio indicates the company success in implementing the company's strategy and method byrelating it with the profit gained from sales andinvestment (Van Home andWachowicz, 2005).
The return on investment calculation is as follow: Return on Investment = Naming After Tax TotalAsset

Previous Researches And Hypothesis Development
There has no research found in Indonesia on SME financial performance, therefore the result of this research refer to research on other countries.
However, the overseas research is limited in number.Locke (2006) research compares the SME financial performance of companies located in the city with the rural area.Theresult indicates that there is a significant difference between SME in the city and in the rural area.Also the SME's financial performance in average in the city is betterthan in the rural area.Onugu (2005) research result indicates that SME in the form of partnership has better performance than SME in the form of sole proprietorship and both has significantdifferences.A classic research done by Butler andHeming (1991) described that ethnic migrants has bigger possibility to bea good entrepreneur than the local ethnic group.
Basedon theprevious researches, it can be hypothesized as follow: HI : There is a significant difference in net profit margin of SME owned by

Javanese with Chinese
H2 : There is a significant difference in operating profit margin of SME owned by Javanese with Chinese : There is a significant difference in net profit margin of SME in the form ofsole proprietorship with partnership : There is a significant difference in operating profit margin c the form ofsole proprietorship with partnership : There is a significant difference in return on investment of S form of sole proprietorship with partnership

Research Methodology 1. Data Collection
This research uses SME located in Yogyakarta and run in aitomotive sector which is in selling spare parts and services as the population.The reason in deciding Yogyakarta as the research location is because the majority of business is dominated with SME and the accessibility of acquiring direct data sample.The automotive sector is selected because in average thiJ business sector has perform for more than three years, grow fast, the availabiliiy of data, and the simplicity in acquiring samples.Based on the survey, the population of automotive sector is 345 SME.The data used is sales, earning before interest and tax, net profit, and investment in 2010 to calculate operating profit marginn et profit margin, and return on investment.The sampling method uses purposive sampling method with several sampling criteria as follow: a.' Javanese entrepreneur : the business owner is Javanese, where the total population is 113 SME and the sample is 50 SME.the business owner is Chinese, where jthe total population is 232 SME and the sample is 50 SME.the business owner is one person, where the total population is 272 SME and the sample is 50 SME.the business owner is more than one person, where the total population is 73 SME and the sample is normally distributed or not.The explanation of normal data distributi on is that the data follow the normal distribution curve where the data converg 5to mean and median.The normality test for data in this research uses Kolmogrov Smimov, to test the two directions by comparing the probability (p' acquired that have significant level (a) of 5%.If the p value > a then the data can be f SME in SAE in the considered to be normally distributed and if p value > a then die data are not normally distributed.

Hypothesis Testing
If the normality test is conducted and the result,of the data test shows that the data are normally distributed,.thenthe next step is to use parametric test which is independent sample t-test.Locke (2006) uses independent sample t-test to compare the SME financial performance in the city with the rural area.The steps of hypothesis testing are as follow : a. Determine the statistic hypothesis for each research variables HI : SME Javanese entrepreneur -NPM SME Chinese Entrepreneur -NPM H2 : SME Javanese entrepreneur -0PM SME Chinese Entrepreneur -0PM H3 : SME Javanese entrepreneur -ROI SME Chinese Entrepreneur -ROI H4 : SME Sole Proprietorship-NPM SME partnership -NPM H5 ; SME Sole Proprietorship-GPM ^SME partnership -0PM H6 : SME Sole Proprietorship-ROI ^SME partnership -ROI h.Select the level of significance a = 5% and determine the degree of freedom from die sample c.Determine the significant value d.Interpret: if the significant value is < a = 5%, then Ho is rejected.In contrary if the significant value is > a = 5%, then Ho is accepted.
The Result OfHypothesis Testing 2. Normality Test The purpose of normality test is to test whether the data is normally distributed or not.In testing the data normality, this research uses kolmogorov smimov test.The decision to determine whether to use parametric or nonparametric test is based on the probability value.The decision is determined if the probability value > 0.05, then it fulfill the normality assumption.The result of normality test using kolmogorov smimov test is as follow: Accepted, the significant value < a = 5%, therefore The result summary of hypothesis four to six statistic test can be seen in table 4. The summary of eachhypothesis as follows: • H4 : Accepted, the significant value < a = 5%, therefore there is a significant difference in net profit margin between sole proprietorship SME form and partnership SME form.The average value of partnership SME form is greater than sole proprietorship SME form.This indicates that partnership SME form able to generate higher net profit margin than sole proprietorship SME form.: Accepted, the significant value < a = 5%, therefore there is a significant difference in operating profit margin between sole proprietorship SME form and partnership SME form.The average value of partnership SME form is greater than sole proprietorship SME form.This indicates that partnership SME form able to generate higher operating profit margin than sole proprietorship SME form.Accepted, the significant value < a = 5%, therefore there is a significant difference in return on investment between sole proprietorship SME form and partnership SME form.The average value of partnership SME form is greater than sole proprietorship SME form.This indicates that partnership SME form able to generate higher return on investment than sole proprietorship SME form.
Figure 1 SME Contribution to Employment and GDPFigure 1: SME contribution to employment and GDP (median values) a significant difference in return on investment of SME owned by Javanese with Chinese is used to test whether the data used in the research are

Table 1 Total
, The problem or topic that is raised in this research is about the opinion in the Indonesian society collected from several printed media which explained that Javanese entrepreneur cannot compete against Chinese entrepreneur in business.This research will discover the profitability of Javanese ent epreneur and Chinese entrepreneur or its descendant whether there is differences or notin their SME business.If not, it can be concluded that Javanese entrepreieur able to compete in obtaining the same profitability with' the Chinese entrep reneur in SIvIE business.This can reject the society's opinion that the profitibility of Javanese entrepreneur in all this time cannot compete with Chinese entrepreneur.

Table 3 :
value of Chinese entrepreneur is greater than Javanese entrepreneur.This indicates that Chinese entrepreneur able to generate higher return on.investment than Javanese entrepreneur!ResultSummary ofIndependent Sample T-Test NPM, OPM, and significant difference in return on investment between SME of Javanese entrepreneur and SME of Chinese entrepreneur.The average

Table 4 :
Result Summary of Independent Sample T-Test NPM, UPM, and This research result provides an answer to several questions i i problem formulation that there is a significant difference in profitability between Javanese entrepreneur-and Chinese entrepreneur.The Chinese en repreneur generates better profit than Javanese entrepreneur.Other research results indicates that there is a significant difference in profitability between sole proprietorship SME form and partnership SME fonn.Partnership SW E form is better than sole proprietorship SME form because they generate hi^er profit than sole proprietorship SME form.The recommendation for the future research is to add other financial measures other than profitability to have better insight than only viewed from profitability only.