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

1 Introduction

The global transition toward low-carbon energy systems has increasingly reshaped development priorities, industrial transformation, and international investment flows. Renewable energy deployment which is supported by technological advancement, climate commitments, and energy-security concerns has become a key pathway for achieving decarbonization goals across developed and emerging economies (Pata et al., 2023). In this transition, foreign direct investment (FDI) plays an important role by supporting capital mobilization, technology transfer, and project development, particularly in countries with limited domestic capacity for large-scale renewable expansion (Ghosh and Ghosh, 2017).

Recent evidence suggests that renewable investment outcomes depend not only on resource availability but increasingly on institutional quality and policy stability. Countries that implement transparent regulations, competitive procurement mechanisms, and long-term policy consistency such as Vietnam and India have achieved stronger renewable investment performance than markets characterized by regulatory uncertainty and administrative complexity (Rashed et al., 2022; Sudirman et al., 2025; Wall et al., 2019). Investor confidence is especially influenced by tariff predictability, contractual reliability, grid accessibility, and governance effectiveness (Adrian et al., 2023; Pambudi et al., 2023).

Indonesia presents an important but underexplored context within this broader transition. Despite possessing substantial renewable energy resources, including geothermal, solar, hydropower, and waste-to-energy potential, the country continues to attract relatively modest renewable energy investment compared with regional peers. Existing evidence indicates that this underperformance is driven less by resource availability than by institutional and policy-related constraints, including regulatory inconsistency, procurement complexity, and market concentration (Ghosh and Ghosh, 2017; Sudirman et al., 2025). A distinctive characteristic of Indonesia's electricity sector is the dominant role of PT PLN (Persero), which strongly influences procurement access, project feasibility, and investment decisions. Although recent reforms have sought to accelerate renewable energy deployment, implementation challenges and regulatory uncertainty continue to affect investor confidence (Kuncoro et al., 2025; Maulidia et al., 2019). Recent sustainable energy policy research further highlights that successful renewable energy transition depends not only on ambitious national targets but also on coherent policy frameworks, effective implementation mechanisms, and investment-oriented regulatory environments. Syafina and Oluleye (2024) demonstrate that existing policy mechanisms remain insufficient to accelerate utility-scale solar photovoltaic deployment in Indonesia, emphasizing that stronger policy support and predictable regulatory frameworks are essential for attracting long-term renewable energy investment. These findings reinforce the importance of examining how renewable energy markets, institutional conditions, policy frameworks, and energy-transition objectives collectively shape foreign renewable energy market-entry decisions in Indonesia.

Although extensive international business research has examined foreign market entry strategies in emerging economies, much of this literature emphasizes entry mode selection, ownership advantages, and host-country attractiveness without adequately explaining how foreign firms navigate institutionally complex environments characterized by regulatory uncertainty, state intervention, and fragmented governance. These challenges are particularly evident in Indonesia, where institutional arrangements play a decisive role in shaping foreign investment outcomes. Within the renewable energy sector, existing studies have predominantly focused on energy policy, investment barriers, and techno-economic assessments, while providing limited understanding of how foreign renewable energy firms formulate market-entry strategies, develop institutional capabilities, and adapt their governance arrangements in response to Indonesia's state-dominated electricity market. Accordingly, this study examines how foreign renewable energy companies formulate and implement market-entry strategies in Indonesia by exploring the interaction between firm motivations, strategic choices, and institutional constraints.

2 Literature review

2.1 Institutional and strategic perspectives on renewable-energy market entry

Recent scholarship increasingly recognizes that renewable-energy investment is shaped not only by technological feasibility and financial returns but also by institutional conditions, organizational capabilities, and strategic responses to regulatory environments (Pata et al., 2023; Wall et al., 2019). As energy transitions accelerate globally, investment decisions are increasingly understood as institutionally embedded processes involving interactions among governments, market actors, and firms.

Institutional Theory provides an important foundation for explaining these dynamics by proposing that organizational behavior is influenced by regulatory, normative, and governance structures rather than market incentives alone (Bhattacharyya, 2020). In renewable-energy sectors, institutional quality affects procurement transparency, contractual certainty, policy continuity, and investor confidence. Studies suggest that in emerging electricity markets, institutional uncertainty frequently exerts greater influence on investment behavior than resource availability or technological readiness (Chantanakome, 2024; Sudirman et al., 2025).

Recent sustainable energy policy research similarly emphasizes that institutional effectiveness extends beyond regulatory design to include governance coordination, implementation capacity, and organizational collaboration. Gudde et al. (2024) argue that effective energy-transition governance requires coherent institutional arrangements, clearly defined organizational responsibilities, and coordinated implementation across multiple stakeholders. These observations complement Institutional Theory by suggesting that institutional quality influences renewable energy investment not only through formal regulations but also through the effectiveness of governance structures responsible for translating policy objectives into implementation.

Entry Mode Theory extends this perspective by explaining how firms translate external market conditions into strategic investment decisions. Traditional international business literature associates market entry with ownership advantages and host-country attractiveness; however, renewable-energy sectors increasingly challenge this logic because investment outcomes depend heavily on regulatory legitimacy and institutional accessibility (Rashed et al., 2022). Consequently, collaborative arrangements including joint ventures, consortia, and strategic alliances have become dominant mechanisms for reducing institutional exposure and improving access to local networks and financing ecosystems (Chantanakome, 2024; Ghosh and Ghosh, 2017).

Alongside institutional and entry-mode perspectives, the Resource-Based View (RBV) and Capability Theory emphasize the role of internal organizational strengths in shaping international expansion. Competitive advantage derives not only from financial and technological resources but also from dynamic capabilities that enable firms to adapt to regulatory shifts, restructure partnerships, and manage institutional complexity (Ferreira and Ferreira, 2025; Teece, 2017). Continuous capability development and knowledge enhancement constitute important mechanisms through which organizations strengthen productivity and maintain long-term competitiveness in dynamic environments (Arokiasamy et al., 2025). Empirical evidence indicates that renewable developers combining technological competence with institutional learning are more capable of sustaining investment under uncertain policy conditions (Supriyanto, 2023).

Financial capability has also received increasing attention within sustainable energy policy research. Xu and Lin (2024) demonstrate that green finance mechanisms play an important role in supporting renewable energy development by strengthening investment capacity and facilitating long-term project financing. While financial resources remain essential for renewable energy expansion, these findings further suggest that financing effectiveness depends upon broader institutional and regulatory environments capable of supporting sustainable investment.

2.2 Renewable-energy market entry in global and Indonesian contexts

Global evidence demonstrates that renewable-energy investment performance depends largely on governance quality and investment certainty. Recent developments in smart technologies and digital infrastructures further suggest that technological capabilities are becoming increasingly important for enhancing energy efficiency and supporting sustainable development initiatives (Raman et al., 2024b). Countries implementing transparent procurement systems, predictable tariffs, standardized PPAs, and streamlined permitting consistently attract stronger foreign participation (Rashed et al., 2022; Wall et al., 2019). Vietnam and India illustrate how coordinated regulatory reforms and investor-oriented procurement mechanisms accelerate renewable deployment, while European markets demonstrate the role of market liberalization and corporate procurement models in expanding participation (Romano et al., 2024; Sudirman et al., 2025).

Recent studies further highlighted that renewable energy deployment depends on the interaction between policy design, institutional capacity and market conditions. In the Indonesian context, Syafina and Oluleye (2024) demonstrate that policy-induced diffusion pathways significantly influence the development of utility-scale solar photovoltaic projects, indicating that stronger policy support and more effective implementation mechanisms are required to accelerate renewable energy investment. Similarly, Xu and Lin (2024) emphasize that supportive financial policies and green finance mechanisms play an important role in facilitating renewable energy development by strengthening investment capacity and reducing financial constraints. Collectively, these studies suggest that renewable energy investment depends not only on market opportunities but also on effective policy implementation, supportive financing mechanisms and strong institutional quality.

Indonesia presents a contrasting institutional environment. Despite substantial geothermal and solar potential and increasing policy commitment toward decarbonization, renewable investment continues to underperform regional peers (Chantanakome, 2024; Ordonez et al., 2021). Existing literature consistently attributes this outcome to institutional and governance constraints rather than resource limitations.

A central feature of Indonesia's electricity sector is the dominant role of PT PLN (Persero) as system planner, grid owner, and sole electricity purchaser, creating concentrated decision-making power and influencing procurement access, project feasibility, and investment incentives (Kuncoro et al., 2025). Although reforms such as Presidential Regulation 112/2022 sought to improve market attractiveness, implementation challenges, policy reversals, and regulatory fragmentation continue to weaken investor confidence (Maulidia et al., 2019; Resosudarmo et al., 2023).

As a result, foreign developers increasingly adopt partnership-oriented strategies including joint ventures, consortia, strategic equity participation, and corporate PPAs to manage institutional risk and improve market access (Putri et al., 2025; Supriyanto, 2023). Achieving sustainable development increasingly requires interdisciplinary approaches and continuous adaptation to technological and economic transformations (Arokiasamy et al., 2024). Furthermore, advances in digital technologies and intelligent systems are increasingly contributing to improvements in operational efficiency and supporting broader sustainability objectives across industries, thereby complementing ongoing efforts toward renewable energy transition and infrastructure modernization (Sanjeevi et al., 2024). Such collaborative arrangements facilitate legitimacy building, resource sharing, and institutional adaptation, thereby enhancing firms' ability to operate effectively within complex market environments (Arokiasamy, 2021). These strategies function not merely as ownership structures but as adaptive responses to procurement uncertainty, PPA bankability concerns, infrastructure limitations, and evolving regulatory expectations (Adrian et al., 2023; Isnandar et al., 2024).

Recent practitioner-oriented literature further suggests that investment decisions emerge through iterative learning, negotiation, and institutional adaptation rather than fixed economic calculations. Moreover, the increasing complexity of sustainability transitions requires firms to strengthen risk-management capabilities and develop resilient organizational systems capable of responding to technological and environmental challenges (Raman et al., 2024a). Effective leadership and stakeholder engagement can contribute to stronger organizational commitment and improve firms' ability to achieve strategic objectives under challenging conditions (Arokiasamy et al., 2022). Furthermore, firms operating in volatile and uncertain environments must continuously develop adaptive capabilities and organizational resilience to respond effectively to changing market conditions and external disruptions (Gazi et al., 2024). Firms frequently rely on relational capability, local partnerships, and accumulated regulatory experience to reduce uncertainty and sustain long-term market participation (Bößner et al., 2023; Mudiantoro, 2024).

2.3 Toward an understanding of foreign market entry in Indonesia

Although foreign market entry has been extensively examined within the international business literature, existing research has primarily focused on ownership advantages, entry mode selection, and internationalization processes across diverse industries. In contrast, recent sustainable energy policy research has increasingly concentrated on governance reform, policy implementation, stakeholder engagement, and renewable energy transition. Kambo et al. (2024) emphasize the importance of participatory governance and collaborative policy processes for supporting long-term energy transitions. Nevertheless, comparatively limited attention has been devoted to understanding how foreign renewable energy firms strategically respond to institutional conditions, policy frameworks, and governance arrangements when entering emerging renewable energy markets. Consequently, the interaction between institutional environments and firms' market-entry strategies remains insufficiently explored, particularly within state-dominated electricity markets such as Indonesia.

Within Indonesia's renewable energy sector, existing studies remain largely concentrated on policy evaluation, techno-economic modeling, and macro-level investment trends (Adrian et al., 2023; Ordonez et al., 2021). Consequently, limited attention has been directed toward understanding how foreign renewable energy firms interpret institutional uncertainty, formulate strategic responses during market entry, negotiate procurement processes, structure partnerships, evaluate PPA bankability, and adapt to PLN's dominant institutional role (Kuncoro et al., 2025; Supriyanto, 2023). Furthermore, Institutional Theory, the OLI Paradigm, and the Uppsala Internationalization Model remain insufficiently integrated to explain why collaborative governance structures have become the dominant market-entry strategy within Indonesia's renewable energy sector.

Accordingly, this study addresses these gaps by examining foreign renewable energy market-entry strategies through an integrated theoretical perspective combining Institutional Theory, the OLI Paradigm, and the Uppsala Internationalization Model. By drawing upon practitioner experiences, the study explains how foreign firms navigate institutional complexity, develop adaptive governance arrangements, and respond strategically to Indonesia's evolving renewable energy market.

The research framework is summarized in Figure 1.

3 Methodology

3.1 Research design

This study adopted an interpretivist qualitative descriptive research design to explore how foreign renewable-energy firms formulate and implement market-entry strategies within Indonesia's evolving institutional environment. An interpretivist approach was considered appropriate because the study sought to understand how participants constructed meaning from regulatory interactions, strategic decisions, and organizational experiences rather than to measure predetermined variables (Flemming et al., 2019). A qualitative descriptive research design was employed because the study aimed to synthesize participants' experiences and perspectives into common themes that addressed the research questions rather than compare individual organizational cases (Yin, 2002).

Semi-structured interviews served as the primary data collection method because they provide sufficient flexibility to capture participant perspectives while maintaining consistency across interviews (Kallio et al., 2016). The interview protocol was structured around themes directly aligned with the research objectives, including motivations for entering Indonesia, entry-mode selection, regulatory experiences, partnership formation, and adaptation strategies. Probing techniques were used throughout interviews to encourage elaboration and obtain richer contextual insights (Robinson, 2023).

Prior to formal data collection, a pilot interview was conducted to evaluate question clarity, sequencing, and procedural effectiveness (Flemming et al., 2019). Consistent with qualitative methodological recommendations, pilot data were excluded from the final analysis to maintain dataset integrity (Kimotho, 2025). Feedback from the pilot informed refinement of question ordering, simplification of abstract concepts, and improvement of interview logistics, contributing to greater consistency and dependability of the data collection process (Malmqvist et al., 2019).

3.2 Data collection and analysis

Participants were selected using purposive sampling to ensure direct experience with renewable energy investment and market-entry activities in Indonesia (Robinson, 2023). Eligible participants were required to have professional responsibilities related to renewable energy investment, project development, strategic decision-making, partnership development, regulatory engagement, or business development within Indonesia's renewable energy sector. In addition, participants were expected to possess substantial knowledge of foreign market-entry strategies and institutional processes relevant to renewable energy project implementation, enabling them to provide rich and relevant insights into the study's research objectives.

Participants were intentionally selected to capture variation in professional roles and experiences related to foreign renewable energy investment in Indonesia. The sample included practitioners involved in different aspects of renewable energy project development, investment evaluation, strategic planning, partnership development, regulatory engagement, and market-entry activities. This variation enabled the study to capture diverse perspectives on institutional barriers, governance arrangements, and investment strategies while maintaining a common focus on foreign renewable energy market entry.

Eight industry practitioners with direct professional experience in renewable energy investment, project development, and foreign market-entry activities in Indonesia were recruited through purposive sampling. The participants occupied managerial, technical, investment, and project development roles, providing perspectives from diverse functional areas of the renewable energy industry. Their professional experience covered solar, hydropower, and geothermal energy projects of varying scales. To protect confidentiality, all participants were anonymized and are identified throughout the study as Resource Person 1 (RP1) to Resource Person 8 (RP8). Table 1 summarizes the demographic and professional characteristics of the interview participants.

Table 1. Profile of interview participants.

Participants are identified using anonymized codes to protect their identities and commercially sensitive information. Project scale refers to the approximate scale of renewable-energy projects with which participants have professional experience.

The demographic and professional characteristics of the interview participants are summarized in Table 1.

The final sample comprised eight industry practitioners with substantial experience in foreign renewable energy investment and project development in Indonesia. Sample size was determined based on the principle of information power, whereby participants possessing extensive professional expertise and direct involvement in renewable energy market-entry decisions can generate sufficiently rich and relevant data to address the research objectives. Data collection concluded when the interviews provided recurring insights and no substantially new themes relevant to the research questions emerged, indicating that the dataset was adequate to support the thematic analysis (Malterud et al., 2016; Guest et al., 2020).

Interviews were conducted following standardized consent procedures and were audio-recorded only after explicit participant approval. All recordings were securely stored and transcribed verbatim to preserve contextual meaning and support analytical depth (Halcomb and Davidson, 2006).

Data were analyzed using thematic analysis following the six-phase framework developed by Braun and Clarke (2021b). Consistent with the qualitative descriptive research design, the analysis focused on identifying recurring patterns and shared meanings across participants' responses. Rather than comparing individual organizational cases, the interview data were integrated to develop overarching themes that addressed the study's research questions. This approach was selected for its flexibility and suitability for interpretive qualitative inquiry seeking to identify patterns of meaning across participant experiences (Braun and Clarke, 2021b; Byrne, 2022). The analytical process involved repeated familiarization with transcripts, systematic coding, development of candidate themes, iterative review, theme refinement, and interpretive synthesis.

Coding combined inductive and deductive approaches to allow both emergent insights and theoretically informed interpretation (Fereday and Muir-Cochrane, 2006). Initial coding remained open to concepts emerging directly from participants' accounts, while deductive coding was subsequently applied to interpret these patterns in relation to Institutional Theory, the OLI Paradigm, and the Uppsala Internationalization Model. Throughout the analysis, codes and emerging themes were continuously compared across interview transcripts and against the original data to ensure coherence, analytical validity, and consistency of interpretation (Kiger and Varpio, 2020). The interpretation process involved moving iteratively between participants' narratives, the developing themes, and the theoretical framework to explain how institutional conditions shaped foreign renewable energy market-entry strategies. Representative participant quotations were retained within the Results section to demonstrate how empirical evidence supported each theme and its interpretation. The final themes were refined through constant comparison across participants' responses and interpreted in relation to the study's research objectives and integrated theoretical framework (Hacker and Binz, 2021).

3.3 Research quality and ethical considerations

Research rigor was established through Lincoln and Guba's trustworthiness framework, incorporating credibility, transferability, dependability, and confirmability (Nowell et al., 2017). Credibility was strengthened through prolonged engagement with interview data, member checking, and triangulation using secondary sources including public documents, company materials, and industry reports (Birt et al., 2016; Carter et al., 2014). Credibility was further strengthened by comparing codes across all interview transcripts and ensuring that each final theme was supported by multiple participant accounts rather than isolated responses. Representative quotations were retained to preserve the connection between the empirical evidence and the researchers' interpretations. Dependability was enhanced through maintaining a documented coding trail that recorded the development and refinement of codes, categories, and themes throughout the analytical process. Transferability was supported through detailed contextual description of the Indonesian renewable-energy environment (Silverman, 2016), while dependability was reinforced through maintaining an audit trail documenting methodological and analytical decisions (Flemming et al., 2019).

Confirmability was enhanced through reflexive journaling and evidence-based interpretation procedures designed to minimize researcher bias (Braun and Clarke, 2021a). To protect participants and commercially sensitive information, anonymity and confidentiality protocols were implemented throughout data collection and analysis (Kara, 2020). Participation remained voluntary, informed consent was obtained prior to each interview, and participants retained the right to withdraw without consequence (Bhattacharya, 2007; Paulus and Lester, 2021). Ethical approval for the study was granted by the university ethics review board in accordance with established standards for research involving human participants (Stewart, 2023). Data management procedures followed recognized confidentiality and protection principles, including secure storage and restricted access (GDPR, 2018; Israel, 2015).

4 Results

This section presents the empirical findings derived from the semi-structured interviews conducted with eight renewable energy professionals representing multinational renewable energy firms operating in Indonesia. Consistent with the qualitative descriptive research design, the findings were synthesized across participants to identify common themes and shared perspectives addressing the three research questions. The findings are organized according to the three research questions and analyzed using a thematic analysis approach. Consistent with the qualitative descriptive research design, the analysis focuses on identifying shared experiences, perceptions, and interpretations regarding foreign market entry into Indonesia's renewable energy sector.

The findings reveal that foreign energy companies' market entry decisions are shaped by a combination of ownership-specific advantages, institutional conditions, and strategic adaptation to Indonesia's regulatory environment. Across all interviews, participants highlighted Indonesia's strong renewable energy potential alongside persistent institutional and regulatory constraints. These findings support the argument that market entry into emerging renewable energy markets is not solely determined by economic attractiveness, but also by firms' capabilities to manage uncertainty, establish local embeddedness, and adapt governance structures to host-country conditions.

The results are presented under three major categories corresponding to the research questions:

• Internal motivations, resources, and capabilities influencing market entry decisions;
• Entry mode strategies adopted by foreign renewable energy companies; and
• Regulatory, financial, and institutional challenges encountered during market entry and operations.

The research questions and themes are summarized in Table 2.

Table 2. Summary of research questions and themes.

4.1 Internal motivations, resources, and capabilities

The findings demonstrate that foreign renewable energy companies enter Indonesia primarily due to a combination of market opportunity, strategic internationalization objectives, ownership-specific capabilities, and institutional adaptation requirements. Participants consistently described Indonesia as a strategically attractive but institutionally complex market requiring strong organizational capability and local engagement.

4.2 Market attractiveness

The results indicate that market attractiveness is one of the strongest pull factors influencing foreign firms' entry decisions. Participants consistently identified Indonesia's large population, growing electricity demand, expanding economy, and abundant renewable resources as major investment drivers. Respondents perceived Indonesia as a high-potential market for long-term renewable energy development.

One participant stated that “Indonesia has a lot of potential in renewable energy” (P1), while another explained that Indonesia is “a very large country, and because it has a large population, there is strong demand for infrastructure and utilities” (P2). Similarly, participant P5 described Indonesia as “a big market, and it is still growing,” reflecting expectations of continued demand expansion.

The findings further indicate that respondents viewed Indonesia's openness to foreign investment as an important enabling factor for renewable energy expansion. Participant P3 highlighted that “there are a lot of opportunities for foreign investment to come in,” particularly within the context of Indonesia's energy transition agenda.

These findings are consistent with previous studies showing that renewable energy FDI in emerging economies is strongly influenced by market size, economic growth, energy demand, and renewable resource availability (Ganda, 2022; Khan et al., 2021). Similar findings have been reported in ASEAN renewable energy markets, where countries with strong renewable resource endowments and rising demand attract greater long-term investment interest (Goh et al., 2025; Ruggiero et al., 2021).

4.3 Strategic motivation for global expansion

The findings indicate that foreign companies' entry into Indonesia was also motivated by broader internationalization and sustainability strategies. Indonesia was viewed not only as an individual investment destination but also as part of firms' long-term global expansion agendas.

Participant P4 stated that “we have an objective to establish a global presence,” indicating that market entry was linked to geographic diversification and international portfolio expansion. Several respondents also connected entry decisions to renewable energy transition commitments and decarbonization goals. Participant P6 explained that entry aligned with the company's mission to support renewable energy development in emerging markets and contribute to Indonesia's energy transition targets. Similarly, participant P7 highlighted that the company was established as part of its parent group's “Net Zero energy transition” commitment.

The findings suggest that strategic expansion into Indonesia enables firms to strengthen international positioning, enhance green technology portfolios, and accumulate experience in emerging renewable energy markets. These findings support prior literature arguing that green FDI and renewable energy internationalization are increasingly linked to sustainability-oriented corporate strategies and long-term capability development (Amendolagine et al., 2021; Chetty et al., 2024; Meygoonpoury et al., 2024).

4.4 Financial strength and funding capability

The findings further demonstrate that financial capability is a critical ownership-specific advantage enabling foreign firms to enter Indonesia's energy market. Participants consistently highlighted the importance of access to capital, diversified funding structures, and strong sponsor backing in managing investment risk and project bankability.

Participant P1 stated that the company was “confident in our financing capability and our ability to bring technology, experience, and funding to the project.” Respondents also emphasized the importance of blended finance, shareholder support, and public financing mechanisms in facilitating project development.

Participant P6 explained that the company leveraged “public funds from multiple countries to finance early-stage renewable projects and mobilize commercial financing,” while participant P8 highlighted that strong financial backing from global investment groups enables participation in large-scale projects and improves bankability.

These findings align with renewable energy finance literature demonstrating that access to financial capital and institutional funding mechanisms significantly influence renewable energy deployment in emerging markets (Ganda, 2022; Khan et al., 2021; Mahbub et al., 2022). The results further support the Eclectic Paradigm (OLI), where financial capability functions as an important ownership-specific advantage facilitating international expansion.

4.5 Technical expertise and project development capability

The findings reveal that technical expertise and project development capability play a central role in supporting foreign market entry into Indonesia. Participants highlighted accumulated engineering knowledge, feasibility assessment capability, and project development experience as critical organizational strengths.

Participant P2 stated that “we are very confident in our engineering design and engineering solutions,” while participant P3 emphasized the importance of “feasibility studies and research on whether a project is feasible and bankable.” Similarly, participant P6 identified technical assessments, financial modeling, and early-stage project development as core organizational capabilities.

The findings indicate that technical expertise reduces uncertainty, improves project bankability, and strengthens firms' ability to navigate Indonesia's complex institutional environment. These findings are consistent with previous studies demonstrating that technological capability and project development expertise influence renewable energy internationalization and entry mode selection (Amendolagine et al., 2021; Li and Xiong, 2022).

4.6 Human capital and organizational capability

The results further indicate that strong human capital and organizational capability are essential for navigating Indonesia's regulatory and technical complexity. Participants emphasized the importance of multidisciplinary project teams, efficient internal governance, and local sectoral expertise.

Participant P4 highlighted that the company possesses “a very strong team in terms of both technical capability and financial capability,” while participant P1 stressed that efficient internal decision-making provides an advantage compared to more bureaucratic institutions.

At the same time, respondents consistently highlighted the importance of local institutional knowledge. Participant P8 explained that “capable local human resources who understand PLN's business model are critical,” while participant P5 noted shortages of experienced renewable energy professionals within the local market.

These findings support previous research indicating that specialized human capital and prior project experience significantly improve firms' internationalization capability and performance in institutionally complex markets (Criaco et al., 2022; Meygoonpoury et al., 2024).

4.7 Local embeddedness and institutional capability

The findings also indicate that local embeddedness and institutional capability are essential enablers of successful market entry. Participants consistently stressed the importance of establishing local offices, building stakeholder relationships, and partnering with local firms.

Participant P3 explained that “establishing a representative office and having a local domicile are quite important,” while participant P2 highlighted that local partners contribute critical contextual knowledge and stakeholder access.

The findings suggest that local partnerships reduce institutional uncertainty and improve firms' ability to navigate Indonesia's regulatory environment. These findings align with institutional and international business theories emphasizing the importance of local networks, institutional fit, and relationship-building in reducing the liability of outsider ship (Brouthers et al., 2022; Martín et al., 2022).

4.8 Entry mode strategies of foreign energy companies

The findings demonstrate that foreign renewable energy companies adopt institutionally adaptive and risk-sensitive entry modes when entering Indonesia's energy market. Participants consistently highlighted the dominance of greenfield development, complemented by joint ventures, strategic partnerships, and selective acquisitions.

4.9 Predominance of greenfield entry modes

The results indicate that greenfield development is the dominant entry mode among foreign renewable energy companies operating in Indonesia. Participants consistently stated that their firms prefer developing projects from the early stage rather than acquiring existing operating assets.

Participant P3 stated that “we mainly focus on greenfield investments,” while participant P6 explained that the company “adopts greenfield development only and does not acquire operating assets.” Similarly, participant P7 emphasized the importance of “developing projects from the early stage.”

The findings suggest that greenfield entry enables firms to retain greater control over project design, financing structures, regulatory compliance, and technology selection. This preference is particularly important in Indonesia's evolving regulatory environment and PLN-dominated electricity market structure.

These findings are consistent with international renewable energy FDI research showing that greenfield subsidiaries dominate renewable energy expansion due to their flexibility and adaptability to host-country institutional conditions (Amendolagine et al., 2021; Patala et al., 2021).

4.10 Use of acquisitions as an initial or opportunistic entry mode

Although greenfield investment dominates market entry, the findings indicate that acquisitions are occasionally used as opportunistic or transitional entry strategies.

Participant P1 noted that the company had “tried several approaches, including acquiring existing projects and developing greenfield projects,” while participant P8 explained that the company “initially entered Indonesia through acquisition.”

The findings suggest that acquisitions provide rapid market access and local operational knowledge but are constrained by limited asset availability, legacy risks, and integration challenges. As a result, acquisitions function primarily as supplementary rather than dominant entry strategies.

4.11 Joint ventures and partnership-based entry modes

The findings reveal that joint ventures and partnership-based arrangements are central to renewable energy market entry in Indonesia. Participants consistently described collaboration with PLN, SOEs, and local firms as necessary for project development and regulatory navigation.

Participant P2 explained that the company “partnered with PLN Nusantara Power, formed a joint venture, and developed the Cirata Floating Solar project,” while participant P4 highlighted collaboration between private IPP developers and PLN subsidiaries.

The findings indicate that joint ventures enable foreign firms to combine technical expertise, financing capability, and international experience with local institutional access and regulatory legitimacy. Flexible partnership structures were also observed in smaller-scale projects.

These findings support renewable energy PPP and FDI literature highlighting the importance of joint ventures and project-level partnerships in managing institutional complexity and facilitating project finance in emerging markets (Fleta-Asín and Muñoz, 2021; Patala et al., 2021).

4.12 Ownership, control, and governance preferences

The results further indicate that foreign firms exhibit strong preferences for governance structures that preserve strategic control and decision-making authority.

Participant P1 stated that the company prefers to be “the majority shareholder, with major voting rights and control,” while participant P2 similarly emphasized majority ownership preferences.

However, respondents also demonstrated flexibility where governance mechanisms could preserve operational influence. Participant P6 explained that minority ownership may still be acceptable if voting rights and governance protections remain intact.

These findings suggest that governance arrangements are carefully structured to balance risk-sharing with strategic control, particularly in capital-intensive renewable energy investments.

4.13 Role of PLN, SOEs, and tender-based entry

The findings demonstrate that PLN and SOEs function as institutional gatekeepers within Indonesia's renewable energy sector. Participants consistently described PLN-led procurement and tender mechanisms as the primary pathway for project entry.

Participant P1 stated that “our first project came through a PLN bidding process,” while participant P2 explained that projects are often pre-developed by PLN subsidiaries before partnership opportunities emerge.

The findings indicate that collaboration with PLN provides project legitimacy, offtake certainty, and bankability, although it also reduces flexibility in ownership and project structure.

These findings align with prior Indonesia-focused research identifying PLN as the dominant actor controlling procurement, grid access, and electricity offtake within the national energy sector (Resosudarmo et al., 2023; Wong and Dewayanti, 2024).

4.14 Regulatory and institutional factors shaping entry mode choices

The findings further indicate that entry mode selection is heavily shaped by regulatory and institutional conditions rather than purely strategic preference.

Participants highlighted licensing requirements, investment approvals, local content regulations, and PLN registration processes as key determinants of ownership structures and partnership arrangements.

Participant P6 stated that “entry mode decisions are influenced by regulatory requirements, licensing processes, and registration with PLN (DPT),” while participant P7 emphasized the importance of compliance with BKPM procedures and sectoral regulations.

These findings suggest that foreign firms adapt governance and ownership structures to manage institutional uncertainty and administrative complexity. Similar conclusions have been reported in renewable energy FDI research emphasizing the influence of institutional quality and regulatory stability on investment decisions in emerging markets (Fleta-Asín and Muñoz, 2021; Mahbub et al., 2022).

4.15 Regulatory, financial, and institutional challenges

The findings indicate that despite Indonesia's strong renewable energy potential, foreign energy companies face substantial institutional and regulatory barriers throughout the project lifecycle.

4.16 Regulatory uncertainty and policy volatility

The findings reveal that regulatory uncertainty represents one of the most significant barriers to renewable energy investment in Indonesia. Participants consistently described frequent policy changes, tariff revisions, and local content adjustments as major sources of uncertainty.

Participant P6 noted that “frequent regulatory and tariff changes, often following elections, create investment uncertainty,” while participant P8 highlighted uncertainty associated with shifting TKDN requirements.

The findings indicate that regulatory volatility increases both operational and financial risk throughout the project lifecycle. These findings align with prior studies identifying policy inconsistency and weak institutional coordination as critical barriers to Indonesia's energy transition (Adrian et al., 2023; Resosudarmo et al., 2023).

4.17 Lengthy and uncertain permitting process

The results further indicate that lengthy permitting procedures significantly delay project development and increase transaction costs.

Participant P1 explained that permits are “difficult to obtain, with long approval processes,” while participant P4 highlighted difficulties associated with local and environmental approvals.

Respondents also described uncertainty regarding PLN procurement timelines and RFP issuance, which complicate project planning and financing.

These findings support previous research identifying bureaucratic permitting systems and multi-level administrative procedures as major barriers to renewable energy investment in Indonesia (Handayani et al., 2025; Sambodo et al., 2022).

4.18 Land acquisition challenges

The findings indicate that land acquisition is another major institutional barrier. Participants highlighted overlapping land claims, private ownership disputes, and restrictive land-use regulations as significant development challenges.

Participant P1 explained that “land acquisition is challenging due to private ownership and overlapping land claims,” while participant P5 noted complications associated with deforestation policies.

The findings suggest that land-related uncertainty significantly increases project delays and development risk. These results are consistent with previous studies demonstrating that unclear land tenure systems and fragmented institutional authority hinder renewable energy implementation in Indonesia (Adrian et al., 2023; Junaedi et al., 2024).

4.19 PLN tendering and institutional bottlenecks

The results further demonstrate that PLN procurement and SOE decision-making processes create substantial institutional bottlenecks.

Participant P3 described PLN tender requirements as “time-consuming and challenging,” while participant P1 noted that PPA signing may occur “one year after tender selection.”

The findings indicate that prolonged procurement and negotiation timelines undermine bankability, delay financial close, and increase investor uncertainty. These findings align with literature highlighting the inefficiency of multi-stage procurement structures and post-selection negotiations within Indonesia's renewable energy sector (Adrian et al., 2023).

4.20 Bankability and financing barriers

The findings reveal that financing and bankability constraints remain critical obstacles for foreign renewable energy developers.

Participants consistently highlighted tariff underpricing, regulatory timing mismatches, and limited domestic financing capacity as major concerns. Participant P1 explained that ODI approval timing conflicts with performance bond requirements, while participant P3 noted that aggressive tender pricing undermines project viability.

The findings suggest that project bankability is highly dependent on realistic tariff structures, sponsor strength, regulatory certainty, and financing conditions. These findings support prior renewable energy finance studies identifying tariff adequacy and regulatory stability as critical determinants of project finance viability (Langer et al., 2023; Sumarno et al., 2022).

4.21 Institutional inefficiency and governance complexity

The findings further indicate that governance complexity and bureaucratic inefficiency significantly increase transaction costs for foreign investors.

Participant P3 described Indonesia as “very bureaucratic and slow, with many layers and limited transparency,” while participant P5 highlighted coordination challenges involving multiple ministries and stakeholders.

The findings suggest that fragmented governance structures create persistent uncertainty throughout project development and implementation. Similar governance challenges have been identified in previous research examining Indonesia's energy transition and institutional capacity constraints (Aditya et al., 2025; Sambodo et al., 2022).

4.22 Entry-stage vs. operational-stage challenges

Finally, the findings indicate that institutional and regulatory challenges are substantially more severe during project entry and development stages than during operations.

Participant P6 stated that “entry-stage challenges are more significant than operational challenges,” while participant P7 explained that operational risks become more manageable once permits and PPAs are secured.

The findings suggest that regulatory risk in Indonesia is heavily front-loaded, with permitting, tendering, and land acquisition representing the most critical barriers during early-stage project development. These findings are consistent with prior studies showing that institutional weaknesses disproportionately affect pre-construction phases of renewable energy projects (Adrian et al., 2023; Resosudarmo et al., 2023).

5 Discussion

This study demonstrates that foreign renewable energy investment in Indonesia is shaped not merely by market attractiveness, but by the interaction between firm-specific capabilities and institutional conditions within the host market. Although Indonesia's large population, growing electricity demand, and abundant renewable energy resources create strong locational incentives for investment, these factors alone are insufficient to guarantee market entry. Consistent with Dunning's Eclectic Paradigm (OLI), the findings indicate that location advantages become meaningful only when firms possess sufficient ownership-specific advantages to manage institutional complexity and long project development cycles (Dunning, 2003; Ghosh and Ghosh, 2017; Bhattacharyya, 2020).

The findings suggest that market attractiveness, financial capability, and technical expertise influence investment decisions through a common underlying mechanism. Participants consistently indicated that firms possessing stronger financial resources, technical expertise, and local institutional knowledge were better able to withstand regulatory delays, navigate procurement requirements, and establish collaborative relationships with PLN and local partners. These observations suggest that Indonesia's institutional environment transforms firm-specific capabilities into strategic assets only when firms possess the capacity to adapt to prolonged regulatory uncertainty and governance complexity (Bhattacharyya, 2020; Pata et al., 2023; Sudirman et al., 2025). Consequently, ownership advantages alone do not guarantee successful market entry. Instead, institutional complexity increases the strategic value of financial resilience, organizational flexibility, and partnership capabilities because these resources enable firms to reduce uncertainty, maintain project bankability, and sustain long-term investment commitments (Adrian et al., 2023; Bößner et al., 2023). This finding extends the conventional interpretation of the OLI Paradigm by demonstrating that ownership advantages derive their value from firms' ability to achieve institutional embeddedness within complex host-country environments (Dunning, 2003; Ghosh and Ghosh, 2017; Mudiantoro, 2024).

The present findings also extend recent sustainable energy policy scholarship. Previous studies have primarily examined how policy frameworks, governance arrangements, and financial mechanisms influence renewable energy deployment and investment outcomes (Syafina and Oluleye, 2024; Xu and Lin, 2024). The present study builds upon this literature by demonstrating that institutional conditions influence not only renewable energy deployment but also firms' strategic behavior during foreign market entry. Rather than acting as passive recipients of government policies, foreign renewable energy firms actively respond through governance adaptation, strategic partnerships, institutional learning, and the development of local embeddedness. Consequently, this study provides a firm-level explanation of how policy frameworks and institutional conditions influence strategic decision-making throughout the market-entry process.

Importantly, the findings extend conventional interpretations of ownership advantages by highlighting institutional embeddedness as a strategic capability. Firms that established local presence, cultivated relationships with regulators and PLN, and collaborated with local partners demonstrated stronger capacity to reduce information asymmetry and navigate bureaucratic complexity. This observation aligns with Institutional Theory and the Uppsala internationalization model, both of which emphasize experiential learning, relational networks, and institutional adaptation in uncertain foreign markets (Kuncoro et al., 2025; Mudiantoro, 2024). In this context, institutional capability functions as a quasi-ownership advantage that enhances firms' ability to manage regulatory fragmentation and state-led procurement systems.

This interpretation also complements recent sustainable energy policy research highlighting the importance of governance effectiveness and institutional coordination for successful energy-transition implementation. Gudde et al. (2024) argue that institutional coordination is fundamental for translating policy ambitions into practical implementation. The present findings extend this perspective by demonstrating that foreign renewable energy firms strategically adapt to institutional complexity through organizational capabilities, partnership formation, and governance restructuring, thereby illustrating how governance quality influences investment behavior at the firm level.

The study further demonstrates that foreign renewable energy firms entering Indonesia adopt hybrid entry strategies rather than relying on a single mode of market entry. Greenfield investment emerged as the dominant strategy because it allows developers to retain control over project design, technology selection, financing structures, and contractual risk allocation. This finding supports the internalization logic of the OLI paradigm, whereby firms internalize critical activities to protect proprietary capabilities and maintain operational control over large-scale infrastructure projects (Ghosh and Ghosh, 2017).

Nevertheless, greenfield investment alone was insufficient to address institutional constraints. Joint ventures and partnership-based arrangements therefore became central organizational mechanisms supporting market entry. Foreign firms frequently collaborated with PLN subsidiaries or local developers in order to gain institutional legitimacy, improve regulatory access, and strengthen project bankability. This finding refines the Uppsala model by demonstrating that internationalization learning processes may be accelerated through partnerships rather than occurring solely through gradual experiential expansion (Mudiantoro, 2024). Partnerships function not only as governance mechanisms but also as institutional learning platforms that allow foreign firms to reduce the liability-of-outsider ship within institutionally complex environments.

The findings additionally indicate that entry mode selection is heavily conditioned by Indonesia's institutional structure, particularly the dominant role of PLN as the single electricity buyer and procurement authority. Rather than freely selecting governance structures based on strategic preference alone, firms adapt organizational arrangements to align with tender systems, local content requirements, and financing expectations. Consequently, hybrid governance structures combining greenfield investment, joint ventures, and flexible contractual arrangements emerge as adaptive responses to institutional uncertainty rather than purely efficiency-driven strategic choices (Chantanakome, 2024; Sudirman et al., 2025).

Although the study did not seek to compare firms systematically by organizational characteristics, the findings suggest meaningful differences in how firms with varying backgrounds responded to Indonesia's institutional environment. Firms possessing extensive international renewable energy experience and substantial financial and technical resources demonstrated greater confidence in pursuing greenfield investments while maintaining strategic control through majority ownership or governance safeguards. In contrast, firms with more limited local experience or those entering the Indonesian market for the first time placed greater emphasis on partnerships, joint ventures, and collaboration with local stakeholders to gain institutional legitimacy and navigate regulatory complexity. Differences were also observed across firms with distinct operational roles. Project developers primarily emphasized technical capability, project bankability, and engineering expertise, whereas investment-oriented organizations highlighted financing structures, risk management, and long-term portfolio diversification. These findings suggest that market-entry strategies are shaped not only by institutional conditions but also by firm-specific characteristics, organizational capabilities, and accumulated international experience, resulting in different pathways toward institutional adaptation within Indonesia's renewable energy sector.

Rather than functioning as independent barriers, regulatory uncertainty, procurement complexity, and fragmented governance interact to create cumulative institutional risk during project development. Frequent policy changes reduce investment predictability, which prolongs financing negotiations and increases transaction costs. Delays in procurement and permitting further weaken project bankability, encouraging firms to rely more heavily on partnership-based governance arrangements that provide institutional legitimacy and regulatory access. Consequently, governance adaptation should be understood as a strategic response to institutional complexity rather than simply a preferred market-entry choice.

These findings further complement recent sustainable energy policy research emphasizing collaborative governance and stakeholder participation throughout energy-transition processes. While Kambo et al. (2024) focus on participatory governance for energy policy development, the present study demonstrates that governance adaptation also occurs within firms as they respond strategically to evolving institutional conditions, procurement systems, and regulatory environments during foreign market entry.

While participants perceived Indonesia's regulatory procedures and PLN's procurement processes as lengthy and complex, these challenges should also be understood within the broader institutional and governance context. Renewable energy procurement in Indonesia involves multiple regulatory authorities, including the Ministry of Energy and Mineral Resources (MEMR), PT PLN (Persero), environmental agencies, and regional governments, each responsible for different stages of project approval, permitting, land acquisition, and power purchase arrangements. Consequently, procurement timelines often reflect the need to satisfy regulatory compliance, technical evaluation, environmental safeguards, and financial due diligence rather than administrative inefficiency alone. Recent studies have similarly observed that procurement delays arise from the interaction of institutional coordination, regulatory requirements, and project-level risk management rather than the actions of a single organization (Halimatussadiah et al., 2024).

Permitting complexity and land acquisition challenges further intensify project development risk. Participants described licensing systems as fragmented, administratively burdensome, and characterized by overlapping institutional authority. Similar observations have been reported in previous renewable energy investment studies in Southeast Asia (Chantanakome, 2024; Supriyanto, 2023). Such institutional inefficiencies significantly prolong project development timelines and increase transaction costs, particularly for foreign developers unfamiliar with local governance systems.

The findings also reveal that financing barriers are closely intertwined with institutional and procurement structures. Aggressive tariff ceilings, delayed power purchase agreement negotiations, currency mismatch exposure, and weak change-in-law protections undermine project bankability and reduce lender confidence. In this regard, financing constraints should not be interpreted solely as economic limitations but rather as institutional outcomes shaped by procurement governance and regulatory inconsistency (Adrian et al., 2023). The study therefore contributes to renewable energy internationalization literature by demonstrating that institutional risk in infrastructure investment is project-based and phase-specific, with the highest concentration of uncertainty occurring during the early stages of market entry and project development.

The integration of the empirical findings with Institutional Theory, the OLI Paradigm, and the Uppsala Internationalization Model enables the development of a conceptual proposition for analyzing foreign renewable energy market entry in institutionally complex environments. Rather than viewing market entry as a sequential decision based solely on ownership, location, and internalization advantages, the findings indicate that successful international expansion is an iterative process shaped by continuous interaction between firm-specific capabilities, institutional conditions, governance choices, and organizational learning.

The proposed framework suggests that foreign renewable energy firms first assess market attractiveness and their ownership-specific capabilities, including financial strength, technical expertise, project development competence, and organizational resources. These internal capabilities are subsequently filtered through host-country institutional conditions, including regulatory stability, procurement systems, governance structures, and policy consistency. Institutional conditions then influence the selection of governance arrangements, where firms strategically combine greenfield investment, joint ventures, partnerships, or other hybrid entry modes to balance strategic control with institutional legitimacy. Through implementation, firms accumulate experiential knowledge, strengthen local relationships, and develop institutional embeddedness, which reinforces organizational capabilities and improves subsequent strategic adaptation. This feedback process extends the Uppsala Internationalization Model by demonstrating that institutional learning occurs through collaborative governance arrangements rather than solely through gradual international expansion.

Accordingly, this study proposes that successful foreign renewable energy market entry in institutionally complex environments is best understood as a dynamic capability-building process in which institutional embeddedness functions as an ownership-related strategic capability linking institutional conditions, governance adaptation, and internationalization outcomes.

Overall, the findings demonstrate that renewable energy investment in Indonesia is fundamentally an institutionally mediated process shaped by the interaction between firm-level capabilities, hybrid governance arrangements, and state-centered market structures. While Indonesia possesses substantial renewable energy potential, the effectiveness of foreign investment depends heavily on firms' ability to develop institutional embeddedness, manage regulatory volatility, and adapt strategically to a highly centralized electricity market. The study therefore highlights the importance of regulatory predictability, procurement transparency, and institutional coordination in strengthening renewable energy investment outcomes and accelerating the country's energy transition objectives (Kuncoro et al., 2025; Resosudarmo et al., 2023).

6 Conclusion

This study examined the market entry strategies of foreign renewable energy companies in Indonesia by analyzing the motivations, governance structures, and institutional challenges influencing investment decisions within a state-dominated electricity market. The findings demonstrate that foreign renewable energy investment is shaped not only by market attractiveness but also by firms' ability to manage institutional uncertainty, navigate regulatory systems, and establish strategic embeddedness within the host-country environment.

The findings demonstrate that Indonesia's renewable energy potential and growing electricity demand provide important locational incentives for foreign investment; however, these advantages translate into successful market entry only when firms possess the financial, technical, and organizational capabilities needed to navigate institutional complexity. Rather than relying on a single governance approach, foreign renewable energy firms strategically combine greenfield investment, joint ventures, and partnership-based arrangements to strengthen institutional embeddedness, manage regulatory uncertainty, and improve project bankability. These findings highlight that market-entry success is shaped not by individual firm or market characteristics alone, but by the dynamic interaction between ownership-specific capabilities and Indonesia's institutional environment (Bhattacharyya, 2020; Bößner et al., 2023; Chantanakome, 2024; Mudiantoro, 2024; Sudirman et al., 2025).

From a policy perspective, the findings suggest that improving Indonesia's renewable energy investment environment requires coordinated action among multiple public institutions rather than isolated regulatory reforms. The Indonesian Government should prioritize reforms targeting the early stages of renewable energy project development, where investors encounter the greatest institutional barriers. The Ministry of Energy and Mineral Resources (MEMR) should lead efforts to strengthen renewable energy policies, improve long-term regulatory consistency, and standardize procurement regulations across the sector. The Ministry of Investment/BKPM should further strengthen the existing Online Single Submission (OSS) system by introducing a dedicated renewable energy licensing pathway that integrates investment permits, environmental approvals, land administration, grid connection coordination, and inter-agency reviews within a single digital platform. As the national electricity utility and principal off-taker, PT PLN (Persero) should improve procurement transparency through clearer tender schedules, more standardized power purchase agreement procedures, and predictable project evaluation processes that enhance investor confidence and project bankability. Environmental authorities and regional governments should strengthen coordination in environmental permitting, land administration, and local project approvals to reduce administrative duplication, improve transparency, and shorten project development timelines. Collectively, these institutional reforms would strengthen regulatory predictability, improve governance efficiency, reduce transaction costs, and enhance Indonesia's attractiveness as a destination for sustainable foreign renewable energy investment while maintaining appropriate regulatory oversight (Ministry of Energy Mineral Resources of the Republic of Indonesia, 2021; Sekretariat Kabinet Republik Indonesia, 2019).

Regulatory volatility, procurement complexity, permitting procedures, and governance fragmentation emerged as the principal constraints affecting renewable energy investment. Addressing these challenges requires targeted institutional reforms, particularly at the project initiation stage, where permitting, land acquisition, and procurement activities have the greatest influence on project timelines and investment confidence (Adrian et al., 2023; Resosudarmo et al., 2023).

Beyond extending Institutional Theory, the OLI Paradigm, and the Uppsala Internationalization Model, this study also contributes to the emerging sustainable energy policy literature. Previous research has primarily examined how policy frameworks, governance arrangements, financing mechanisms, and institutional reforms influence renewable energy deployment and energy-transition outcomes (Syafina and Oluleye, 2024; Xu and Lin, 2024; Gudde et al., 2024; Kambo et al., 2024). The present study builds upon this literature by shifting the analytical focus from policy outcomes to firm-level strategic responses. Specifically, it demonstrates how foreign renewable energy firms interpret institutional conditions, adapt governance arrangements, develop strategic partnerships, and strengthen institutional embeddedness while entering institutionally complex renewable energy markets. By integrating Institutional Theory, the OLI Paradigm, and the Uppsala Internationalization Model, this study provides a complementary perspective linking sustainable energy policy with international business strategy, thereby contributing new theoretical insights into how institutional environments influence foreign renewable energy investment and market-entry behavior in emerging economies. In particular, the findings demonstrate that institutional embeddedness constitutes a critical ownership-related capability and that partnership structures accelerate institutional learning and market adaptation in institutionally complex environments (Kuncoro et al., 2025; Mudiantoro, 2024).

From a practical perspective, the findings highlight the importance of improving regulatory predictability, procurement transparency, and inter-agency coordination in order to strengthen investor confidence and improve project bankability. For foreign investors, successful market entry requires long-term institutional engagement, strong local partnerships, and adaptive governance capability alongside financial and technical resources.

In conclusion, foreign renewable energy investment in Indonesia represents an institutionally negotiated and strategically adaptive process shaped by the interaction between firm capabilities and state-centered governance structures. Strengthening institutional effectiveness and reducing regulatory uncertainty will therefore be essential for accelerating renewable energy deployment, attracting sustainable foreign investment, and supporting Indonesia's broader energy transition ambitions. To accelerate renewable energy deployment, policymakers should consider strengthening the implementation of the OSS system through a dedicated renewable energy permitting pathway, standardizing approval procedures across government agencies, establishing clear processing timelines, and enhancing coordination among relevant institutions. These measures would improve regulatory predictability, reduce administrative delays during project development, and strengthen Indonesia's attractiveness as a destination for foreign renewable energy investment. The government's existing OSS framework provides a foundation for this approach by integrating business licensing into a single electronic system.

7 Limitations

This study has several limitations. First, the qualitative design based on interviews with eight industry practitioners limits the generalizability of the findings, as the study prioritized contextual depth over broad representation (Guest et al., 2013; Silverman, 2016). Second, the research primarily reflects the perspectives of foreign renewable energy developers and does not include views from regulators, financial institutions, or PLN, which may limit multi-stakeholder interpretation of investment dynamics within Indonesia's renewable energy sector (Kuncoro et al., 2025; Mudiantoro, 2024). Third, Indonesia's renewable energy regulatory environment remains highly dynamic, meaning that evolving procurement mechanisms, tariff structures, and local content regulations may influence the future relevance of certain findings (Adrian et al., 2023; Resosudarmo et al., 2023). Despite these limitations, the study provides valuable practitioner-grounded insight into renewable energy investment strategies and institutional challenges in Indonesia.

8 Future research

Future research should expand the diversity of respondents by including regulators, financial institutions, PLN officials, and other industry stakeholders to provide broader institutional perspectives on renewable energy investment. In addition, mixed-method approaches combining qualitative and quantitative analysis could strengthen the robustness and generalizability of findings within renewable energy internationalization research (Marshall et al., 2013). Longitudinal studies examining how firms adapt to regulatory reforms over time would also provide valuable insight into evolving institutional risks within Indonesia's electricity sector (Chantanakome, 2024). Finally, comparative studies involving other state-dominated emerging markets such as Vietnam or Bangladesh could help identify broader patterns in renewable energy internationalization and institutional adaptation (Ghosh and Ghosh, 2017; Kuncoro et al., 2025).

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Footnotes

Edited by: Chavis Ketkaew, Khon Kaen University, Thailand

Reviewed by: Ajeng Puspa Marlinda, Muhammadiyah University of Yogyakarta, Indonesia

Septyanto Galan Prakoso, Sebelas Maret University, Indonesia