Institutional failure and the shadow of local elites: a multi-case study of problematic village enterprises in Indonesia

Indonesia’s village-owned enterprises (BUMDes), backed by substantial fiscal decentralization, are envisioned as catalysts for rural economic autonomy. However, many remain stagnant despite receiving significant state capital injections. While existing literature often examines elite capture, human capital deficits, and institutional breakdown as isolated operational flaws, this study contributes to governance theory by analyzing their systemic convergence. Utilizing a qualitative multi-case design across two districts, data from in-depth interviews and document reviews were analyzed through a structured coding strategy in NVivo software, focusing on theme generation and cross-case synthesis. The findings reveal a self-reinforcing ‘triple trap of failure’: local political structures inadvertently formalize low managerial competency, which in turn weakens institutional accountability. This dynamic drives ‘isomorphic mimicry,’ where BUMDes function primarily as compliant administrative shells to secure state funding while experiencing operational stagnation. Rather than a simple technical deficit, BUMDes vulnerability is deeply embedded in localized power relations that erode community social trust. To address these deep-rooted structural issues, this study proposes solutions that extend beyond superficial fixes. It recommends a structural overhaul of village-level governance, including the establishment of an independent, district-verified recruitment selection team to eliminate elite nepotism, as well as the mandatory integration of real-time digital transparency tools to enhance community-based oversight.