The research, led by Anantha Raj A. Arokiasamy of INTI International University in Malaysia with colleagues from India and the United States, draws on three established frameworks from international business theory: Institutional Theory, Dunning’s Eclectic Paradigm, and the Uppsala Internationalization Model. Together, these lenses allowed the team to analyze market entry as more than a financial calculation. The central argument is that in markets like Indonesia, where a single state-owned enterprise controls procurement and power purchasing, institutional conditions can matter as much as resource availability or technological readiness in shaping whether foreign investment materializes at all.

To investigate this, the researchers adopted an interpretivist qualitative design built around semi-structured interviews with eight industry practitioners. The participants, anonymized as Resource Person 1 through 8, held senior roles spanning project development, engineering, investment management, and country-level leadership, with professional experience covering solar, hydropower, and geothermal projects ranging from medium-scale installations of roughly 10 megawatts to large-scale developments exceeding 100 megawatts. Interview data were transcribed verbatim and analyzed using Braun and Clarke’s six-phase thematic analysis, combining inductive coding that let themes emerge from the practitioners’ accounts with deductive coding that interpreted those patterns against the study’s theoretical frameworks. Rigor was maintained through member checking, triangulation with public documents and industry reports, a documented coding trail, and reflexive journaling.

The first major finding concerns why these firms come to Indonesia at all. Market attractiveness emerged as a powerful pull factor, with participants citing the country’s large population, expanding economy, growing demand for infrastructure and utilities, and rich renewable resource base. One practitioner described Indonesia as having ‘a lot of potential in renewable energy,’ while another emphasized that the country’s size and population generate strong demand for power infrastructure. But economic opportunity alone did not explain entry decisions. Several firms framed Indonesia as part of broader global expansion and decarbonization strategies, with one respondent linking entry directly to a parent group’s net zero energy transition commitment. For these companies, the Indonesian market was a strategic asset in an international portfolio, not merely an isolated investment destination.

Just as important were firm-specific capabilities that the study identifies as ownership advantages in the OLI framework. Financial strength ranked foremost: practitioners stressed access to capital, diversified funding structures, sponsor backing, and mechanisms such as blended finance and public funds from multiple countries that could mobilize commercial financing for early-stage projects. Technical expertise followed closely, encompassing engineering design, feasibility assessment, financial modeling, and the ability to judge whether a project was genuinely bankable. Human capital mattered too, particularly multidisciplinary teams capable of rapid internal decision-making, and, critically, local professionals who understood the business model of Indonesia’s national utility. Firms lacking such local knowledge faced a steep learning curve in a market where institutional relationships often determine project outcomes.

The second cluster of findings concerns entry mode, and here the results were strikingly consistent: greenfield investment dominated. Practitioners repeatedly stated a preference for developing projects from the ground up rather than acquiring existing operating assets, because greenfield development preserves control over project design, technology selection, financing structures, and regulatory compliance. Acquisitions appeared only occasionally, as opportunistic or transitional strategies constrained by limited asset availability, legacy risks, and integration challenges. Instead, greenfield investment was typically reinforced by joint ventures and strategic partnerships, frequently with PT PLN (Persero), the state electricity utility that serves as system planner, grid owner, and sole electricity purchaser. One participant described partnering with PLN Nusantara Power in a joint venture to develop the Cirata Floating Solar project, an arrangement combining foreign technical and financial capabilities with local institutional access.

These partnership structures, the authors argue, function as far more than conventional governance arrangements. They act as institutional learning platforms that accelerate adaptation in a market where foreign firms otherwise suffer from the ‘liability of outsidership’ described in institutional theory. Ownership preferences were carefully calibrated: most firms wanted majority stakes with strong voting rights to preserve strategic control, though some accepted minority positions where governance protections maintained operational influence. Notably, entry mode selection was heavily conditioned by regulatory requirements, licensing processes, local content rules, and registration with PLN, meaning firms adapted their governance structures to institutional realities rather than choosing them freely. In effect, the study proposes that institutional embeddedness itself operates as a quasi-ownership capability in institutionally complex environments, an extension of the conventional OLI Paradigm.

The third set of findings details the barriers that make Indonesia such a demanding market. Regulatory uncertainty topped the list, with practitioners reporting frequent policy and tariff changes, sometimes following elections, and shifting local content requirements that destabilize investment planning. Permitting was described as lengthy and fragmented across multiple authorities, including the Ministry of Energy and Mineral Resources, environmental agencies, and regional governments. Land acquisition presented its own obstacles, from overlapping private ownership claims to complications arising from deforestation policies. PLN’s tendering processes were characterized as time-consuming, with power purchase agreements sometimes signed a full year after tender selection. Bankability barriers compounded these problems, as aggressive tariff ceilings, timing conflicts between regulatory approvals and performance bond requirements, and limited domestic financing capacity undermined project viability. Participants described the broader system as bureaucratic, multi-layered, and limited in transparency.

Crucially, the study finds that these risks are not evenly distributed across the project lifecycle. Institutional and regulatory challenges concentrate overwhelmingly at the entry and development stages, while operational risks become manageable once permits and power purchase agreements are secured. The authors argue that regulatory uncertainty, procurement complexity, and fragmented governance should be understood not as independent obstacles but as interacting forces that create cumulative institutional risk: policy volatility prolongs financing negotiations, procurement delays weaken bankability, and weak bankability pushes firms further into partnership-based governance that provides legitimacy and regulatory access. This phase-specific, front-loaded risk profile has direct implications for policy design, suggesting reforms targeted at early-stage development would deliver the greatest improvement in investor confidence.

The study’s conclusions extend beyond Indonesia. Theoretically, it demonstrates that market entry in institutionally complex, state-dominated electricity markets is best understood as a dynamic capability-building process, in which hybrid governance arrangements combining greenfield investment, joint ventures, and flexible contracts emerge as adaptive responses rather than efficiency-driven choices. Practically, the authors call for coordinated reforms: greater regulatory predictability led by the energy ministry, a dedicated renewable energy licensing pathway within Indonesia’s existing Online Single Submission system integrating permits, environmental approvals, land administration, and grid coordination, and improved procurement transparency from PLN through clearer tender schedules and standardized power purchase procedures. For foreign investors, the message is equally clear: financial and technical resources are necessary but insufficient. Success in Indonesia’s renewable energy sector demands long-term institutional engagement, strong local partnerships, and the adaptive capacity to turn regulatory complexity into a learnable, manageable strategic challenge.

Subject of Research: Foreign renewable energy market entry strategies and institutional barriers in Indonesia's state-dominated electricity sector

Article Title: Powering sustainable development: foreign renewable energy market entry strategies in Indonesia-an institutional theory perspective

Article References: Powering sustainable development: foreign renewable energy market entry strategies in Indonesia-an institutional theory perspective. (n.d.). https://doi.org/10.3389/fsuep.2026.1911959

Image Credits: AI Generated

DOI: 10.3389/fsuep.2026.1911959

Keywords: renewable energy, foreign direct investment, Indonesia, institutional theory, market entry strategy, PLN, greenfield investment, joint ventures, energy transition, project bankability, regulatory uncertainty, sustainable energy policy