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Institutions, entrepreneurship, and regional growth in Indonesia (1994-2010)

Author

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  • François Facchini

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Suban Subandono

Abstract

The aim of this chapter is to explain the relationship between institutions, entrepreneurship, and economic growth. It contributes to the modern Austrian theory of economic development by developing an original theory of institutional flexibility. It suggests that the Schumpeterian figure of the innovator and the Kirznerian figure of the discoverer may only appear when the institutions of economic order are flexible. Its originality is in the definition of institutional flexibility. An institutional system is deemed flexible when it constructs an order that is neither contingent nor determinist. Private property rights, contracts, and money organize human behavior without determining it. By protecting economic freedom, people may believe that they can act to change the future to their advantage It describes two motivations, both empirical and theoretical. The empirical aim is to contribute to the debate on the role of entrepreneurship in developing and poor countries. Entrepreneurship is a vital force in the economics of developed countries (Audretsch and Keilbach, 2004). However, its role in developing and poor countries remains unclear. Empirically, van Stel et al. (2005) found that entrepreneurial activity has a positive effect on economic growth in developed countries, whereas the effect is negative for poor countries and remains unclear in developing countries. Thus, this study seeks to uncover empirically the role of entrepreneurship in Indonesia as a developing country. It considers not only the dichotomies in defining entrepreneurship (i.e. formal/informal, legal/illegal and necessity/opportunity), but also the existence of regional spatial dependency.

Suggested Citation

  • François Facchini & Suban Subandono, 2017. "Institutions, entrepreneurship, and regional growth in Indonesia (1994-2010)," Post-Print hal-01745421, HAL.
    • Handle: RePEc:hal:journl:hal-01745421
    DOI: 10.4337/9781783472666.00011
    Note: View the original document on HAL open archive server: https://hal.science/hal-01745421
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    References listed on IDEAS

    as
    1. Christian Bjørnskov & Nicolai Foss, 2010. "Economic Freedom and Entrepreneurial Activity: Some Cross-Country Evidence," Springer Books, in: Andreas Freytag & Roy Thurik (ed.), Entrepreneurship and Culture, chapter 0, pages 201-225, Springer.
    2. repec:ucp:bkecon:9780226320625 is not listed on IDEAS
    3. André Stel & Martin Carree & Roy Thurik, 2005. "The Effect of Entrepreneurial Activity on National Economic Growth," Small Business Economics, Springer, vol. 24(3), pages 311-321, February.
    4. David Audretsch & Max Keilbach, 2004. "Entrepreneurship Capital and Economic Performance," Regional Studies, Taylor & Francis Journals, vol. 38(8), pages 949-959.
    5. Heiner, Ronald A, 1983. "The Origin of Predictable Behavior," American Economic Review, American Economic Association, vol. 73(4), pages 560-595, September.
    6. David B. Audretsch, 1995. "Innovation and Industry Evolution," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262011468, December.
    7. Dawson, John W, 1998. "Institutions, Investment, and Growth: New Cross-Country and Panel Data Evidence," Economic Inquiry, Western Economic Association International, vol. 36(4), pages 603-619, October.
    8. Anselin, Luc & Hudak, Sheri, 1992. "Spatial econometrics in practice : A review of software options," Regional Science and Urban Economics, Elsevier, vol. 22(3), pages 509-536, September.
    9. Besley, Timothy, 1995. "Property Rights and Investment Incentives: Theory and Evidence from Ghana," Journal of Political Economy, University of Chicago Press, vol. 103(5), pages 903-937, October.
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    1. Nurmalia & Djoni Hartono & Irfani Fithria Ummul Muzayanah, 2020. "The Roles of Entrepreneurship on Regional Economic Growth in Indonesia," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 11(1), pages 28-41, March.

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    Indonesia; Entrepreneurship;

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