Optimization Innovation System of Sme Sector in Order to Increase the Competitiveness of SME’s (Assessment in the Food Industry Sector Sidoarjo Regency with Dynamic Systems Approach)

The position of SMEs is in the lowest position in the economic structure of the country , but a lot to contribute revenue to the state. The level of competition is very high in SMEs with intense competition . Many SMEs are emerging , but many who later went bankrupt . To increase the level of competition in a competitive SME it is necessary to look at the whole situation with the innovation system approach that involves all stakeholders , the involvement of government , private sector and universities in developing innovation competitiveness of SMEs in order to obtain good so that they can survive and earn sufficient profits or even create new markets . This study will be made ??within 3 (three) years with the achievements that have been determined each year of data collection , problematization , to creating simulations that try , represent the real world in the research data . Based on the research results , especially at the stage of problem recognition by researchers obtained several things: (1) at the stage of identifying problem situations that are not structured in the context of SME innovation in the food sector in general Sidoarjo have some problems , among others, (a) SMEs have the technological constraints namely the low uniformity of product quality and sanitation , (b) the limited capacity and the opportunity to innovate or try new technologies , (c) the issue of capital , infrastructure , transportation , distribution , quality control , standardization , economies of scale , promotion , market access , product image , the quality of products , availability of raw materials , no branding , about the quality , inadequate volume , authorization foodstuffs , contaminants delimitation , the complexity of import and export certification , standard labeling systems that are not consistent , production , product development , quality control , accounting , machinery , organization management , data processing , marketing techniques , market research . (2) at the stage of identifying situations/problems in a structured note that the main problems facing SMEs in the food sector in Sidoarjo district are as follows : (a) the difficulty of marketing ; (b) financial constraints , (c) the limitations of the Human Resources (HR) ; (d) the problem of raw materials , and (e) the limitations of the technology . (3) the stage of defining the root of the problem situation is known that the main problems of innovation development of SMEs in the food sector Sidoarjo related to the following : (a) aspect of the organization, (b) institutional aspects ; (c) aspects of function ; (d) aspects of the functions activities , and (e) aspects of organizational dynamics , institutions , functions , and activities. Keywords : SMEs , competitiveness , innovation systems , dynamic system