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A new index to measure ease of doing business at the sub-national level: Empirical findings from Indonesia

Khee Giap Tan (Asia Competitiveness Institute, National University of Singapore, Singapore)
Mulya Amri (Asia Competitiveness Institute, National University of Singapore, Singapore)
Nurina Merdikawati (Asia Competitiveness Institute, National University of Singapore, Singapore)

Cross Cultural & Strategic Management

ISSN: 2059-5794

Article publication date: 17 May 2018

Issue publication date: 30 July 2018

616

Abstract

Purpose

The purpose of this paper is to propose a novel framework to measure ease of doing business (EDB) that undertakes a holistic approach incorporating three distinct environments: attractiveness to investors, business friendliness, and competitive policies (ABC). This is offered as an alternative to existing popular indicators of doing business (DB), allowing for better approximation of investment and economic growth at the sub-national level.

Design/methodology/approach

The proposed “EDB Index ABC” aggregates 74 indicators into five sub-environments, three environments, and ultimately into the overall EDB Index ABC. Values are standardised using the standardised score method. The framework is applied to 33 Indonesian provinces using a combination of primary data from surveying the business community and government departments as well as secondary data from formal government statistics.

Findings

The findings suggest a positive association between the proposed EDB Index ABC and competitiveness as well as investments into Indonesian provinces. In terms of explanatory power, attractiveness to investors and business friendliness seem to be stronger and more consistent, while the role of competitive policies is more ambiguous.

Originality/value

This research departs significantly from conventional approaches to the study of DB that tend to overwhelmingly focus on formal regulatory aspects by including macroeconomic factors such as market potential and infrastructure resilience as well as micro-level variables such as profitability and cost effectiveness, and the role of government in managing competition. Responding to calls for a bottom-up approach in understanding the EDB, the EDB Index ABC is applied to 33 Indonesian provinces.

Keywords

Acknowledgements

The authors acknowledge the contribution of Jenn Beh in providing background research assistance for the paper. The authors are also grateful to the anonymous reviewers and the editors of this journal for highly constructive comments on earlier versions of the paper.

Citation

Tan, K.G., Amri, M. and Merdikawati, N. (2018), "A new index to measure ease of doing business at the sub-national level: Empirical findings from Indonesia", Cross Cultural & Strategic Management, Vol. 25 No. 3, pp. 515-537. https://doi.org/10.1108/CCSM-01-2017-0009

Publisher

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Emerald Publishing Limited

Copyright © 2018, Emerald Publishing Limited

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