This paper performs an investigation on how strategic alliances can build competitive advantage of entrepreneurship specially on small and medium enterprises (SMEs) in Indonesia. The study provides some theoretical and managerial implications regarding steps to be taken by entrepreneurship in Indonesia to improve competitive advantages through strategic alliances. The respondents in this study are 63 SMEs managers from 5 regions in Indonesia. The results of the data analysis show that strategic

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... alliances had a significant positive impact on the competitive advantages of entrepreneurship (SMEs). Strategic alliances of SMEs will be able to encourage increased competitive advantages of SMEs as long as the main priority is emphasized on the interest of alliance cooperation, particularly the improving skills and application of technology. Moreover, one of the important points in strategic alliances model is on improving transaction processing cost as manifestation of the competitive advantages of SMEs in Indonesia.