Since cluster development factors become a critical issue in the debate of the industrial
cluster literature, several scholars have attempted to seek the variables that influence the
cluster growth. This paper presents the case of the wood furniture cluster of Bukir-
Indonesia to explain the development of SME clusters by identifying its influential factors.
We utilize the model proposed by Parrilli (2009) that includes collective efficiency, social
capital, and policy inducement variables to explore the driving factors of this cluster
growth. Based on the qualitative approach, this case study found that collective efficiency
and social capital affect the development of SME cluster being studied, while policy
inducement provides limited contribution to the growth of this cluster. The availability of
skilled labour, raw materials and the demand of domestic market supports the local
external economy of this location while joint action among cluster actors in the form of
sharing order and putting-out between SMEs and retailers adds to collective efficiency.
Furthermore, social capital as a common value bound the unity among actors in a friendly
competition. However, the inducement policy stimulating the development of this cluster
has limited impact since there is no deliberative action seriously carried out by the
municipal government of Pasuruan. The study recommends more deliberative program is
designed to meet the needs of cluster actors to cope their obstacles.