Assessment of Local Capacity Development Interventions in
Indonesia:
Model Development and first Empirical Results
Bob Jan Schoot Uiterkamp
Assessment of Local Capacity Development Interventions in
Indonesia:
Model Development and first Empirical Results
Author R.J.H. Schoot Uiterkamp Student number 1555502 Address Rauwenhofflaan 174 3571 HN Utrecht E-mail rjh.schootuiterkamp@gmail.com Cell +31 (0)653974598
University University of Groningen
Faculty Faculty of Economics and Business
Specialization MSc International Business & Management Supervisors Dr. B.J.W. Pennink
EXECUTIVE SUMMARY
Recent development interventions acknowledge the role of increasing capabilities in remote rural regions. The current emphasis on local capacity development (LCD) can be understood in the light of two processes. As a result of processes of globalisation and the opening of national economies, producers in remote, rural regions in developing countries have the potential to benefit from increased access to large national, regional and global markets. However, the opening of national economies also discloses local and regional economic structures with little or no capacity to compete in competitive market environments. The second interrelated process which results in increased emphasis on LCD is the process of decentralisation of government responsibilities in a large share of developing countries. Hereby, local- and provincial governments are assigned important roles in the socio-economic development of their regions. This relative autonomy of local and provincial governments is complicated since local- and provincial governments are often not used to decision-making power before and local business development should occur in contexts characterized by increased competition.
Despite the increased recognition of the need for LCD and the implementation of numerous LCD-interventions in remote, rural regions in developing countries, the process of LCD is poorly understood and the impact of LCD-interventions is often unclear. Hence, using a qualitative method of analysis, this study presents a model to measure and rank the impact of interventions. The model is applied to assess the impact of LCD-interventions in three remote, rural regions at Sulawesi, Indonesia, to be Bau-Bau, Pinrang and Kendari. The model consists of three levels including „team of recipients, institutional and enterprise level‟. The results showed that Pinrang outperforms Bau-Bau and Kendari on the three levels of analysis: the teams of recipients have higher ownership of-, commitment to-, and satisfaction with acquired knowledge; infrastructure provisions are highest; multi-sector partnerships exist; agglomerations of local producers are established and external investment is attracted.
Keywords: Local capacity assessment model; Remote rural areas; Networks; Knowledge
PREFACE
The master thesis in front of you forms the last element for me to finish the Master International Business and Management. The study was initiated in February 2010 by Bartjan Pennink. After years of initiating local capacity development interventions in Indonesia via Indonesian-Dutch cooperation, more insight was requested in the outcomes of interventions were business and governance knowledge of Indonesian and Dutch universities was shared with local mixed-stakeholder teams from rural areas in Indonesia. My enthusiasm was triggered and by April 2011 I spoke my first words Bahasa Indonesia. I spent two months in Indonesia, mainly in Sulawesi and during the field research my excitement increased even more. Therefore, upon return in the Netherlands, I decided to start with the master International Development Studies in Utrecht alongside the writing this thesis.
I felt inspired to spend most of my spare-time, mostly late evening hours, working on this thesis to make my work – indirectly – valuable for people whose voices are not easily heard. Moreover, I hope that this contribution enhances understanding of scholars, policymakers and practitioners about processes, impacts, barriers and facilitators of local
capacity development interventions.
ACKNOWLEDGEMENTS
At this place I would like to thank everyone who has contributed to the accomplishment of this master thesis. A smile pops up when the great memories about conducting field research at Sulawesi and the many friends I made cross my mind. My special word of thank goes to Pak Yusri and family, Pak Kiky, Pak Abduh, Pak Mukmin and Pak Ranu as well as to Ibu Atun, Ibu Dhani and Ibu Yati for their hospitality and support during my stays in Makassar, Bau-Bau, Kendari and Pinrang. Your friendship made the stay at Sulawesi unforgettable and my dream is to return one day and see you all again. Secondly, I would like to thank all who contributed to the data gathering process, first and foremost the members of the LERD-teams of Bau-Bau and Pinrang and the members of the Kendari REDS-team.
Then, I would like to thank my supervisors Dr. Bartjan Pennink and Mr. Drs. Henk Ritsema. It goes without saying for all who know Bartjan, that he has a very own style of supervision. Providing feedback by handing over a book while saying: „This might be
interesting‟, triggered to discover by myself, which made writing this thesis a pleasant
academic experience. Thanks a lot, also for your patience.
Thanks to my great friends and family, I had the luck always to find someone with whom I could share the usual thesis-writing frustrations or just having a drink, or two, and forget about writing a thesis for the rest of the evening. It was highly appreciated. Last but not least, Christien, you make every day together a beautiful one, for almost five years already.
Terima kasih!
TABLE OF CONTENTS
1. INTRODUCTION ... 11
1.1 Setting the Scene – Development Paradigms in a Nutshell ... 11
1.2 Scope of Research – A Focus on Local Capacity Development ... 13
1.2.1 Influenced by Processes of Globalisation and Decentralisation ... 13
1.2.2 Local Capacity Development Interventions ... 14
1.2.3 Acknowledged by Leading Institutions ... 14
1.3 Gaps in Literature ... 15
1.3.1 The Process of Local Capacity Development ... 15
1.3.2 The Impact of Local Capacity Development-Interventions ... 15
1.3.3 Recommendations to Assess the Impact of Local Capacity Development-Interventions ... 16
1.4 Objectives and Contribution ... 16
1.5 Feasibility ... 17
1.6 Research Structure ... 18
2. RESEARCH DESIGN ... 19
2.1 Problem Statement ... 19
2.1.1 Research Objective ... 19
2.1.2 Main Research Question and Sub-questions ... 19
2.1.3 Demarcations of the Study ... 20
2.2 Research Processes ... 21
2.3 Research Classification and Design ... 22
2.3.1 Pros and Cons of Case-Study Research ... 23
2.4 Strategies for Data Collection ... 24
2.5 Research Methods ... 24 2.5.1 Descriptive Review ... 24 2.5.2 Ethnographic Methods ... 24 2.5.3 Case-Study Methods ... 25 2.5.4 Synoptic Review ... 26 3. LITERATURE REVIEW ... 27 3.1 Terminology ... 27
3.2 Plea for Local Capacity Development ... 29
3.2.1 Top-Down Development Interventions until the 1980s ... 29
3.2.2 Reliance on Private- and Non-Governmental Sectors in the 1980s ... 30
3.2.3 Dividing Responsibilities and a Focus on Human Development 80s-2000 31 3.2.4 Development Debate in the 21st Century ... 32
3.3 Theoretical Framework ... 33
3.3.1 Earlier literature on Micro-Finance Impact Assessments ... 33
3.3.2 Current Literature on Local Capacity Development ... 37
3.3.3 Similarities between Micro-Finance and LCD-Intervention Impact Assessments ... 39
3.2.4 Local Capacity Assessment Model ... 41
3.4 Methods Applied to Assess the Impact of Local Capacity Development-Interventions ... 43
4. LOCAL CAPACITY DEVELOPMENT IN INDONESIA ... 44
4.1 Post- Colonial Economic History Indonesia ... 44
4.2.1 LERD/REDS-Interventions ... 46
4.3 Local Capacity Development-Interventions at Sulawesi ... 47
4.3.1 Socio-Economic Profiles ... 47
4.3.2 Needs Seaweed Sector Bau-Bau 2007 ... 48
4.3.3 Needs Shrimp Sector Pinrang 2008 ... 49
4.3.4 Needs Fish Abon Sector Kendari 2009 ... 49
5. RESULTS ... 51 5.1 Team of Recipients ... 51 5.1.1 Bau-Bau ... 51 5.1.2 Pinrang ... 51 5.1.3 Kendari ... 52 5.2 Institutional Level ... 52 5.2.1 Bau-Bau ... 52 5.2.2 Pinrang ... 53 5.2.3 Kendari ... 54 5.3 Enterprise Level ... 55 5.3.1 Bau-Bau ... 55 5.3.2 Pinrang ... 56 5.3.3 Kendari ... 57
6. ANALYSIS AND EMERGING THEORY ... 60
6.1 Analysis ... 60
6.1.1 Team of Recipients Level ... 60
6.1.2 Institutional Level ... 60 6.1.3 Enterprise level ... 64 6.2 Emerging Theory ... 65 6.2.1 Team of Recipients ... 65 6.2.2 Institutional ... 66 6.2.3 Enterprise ... 66
6.2.4 Local Socio-Economic Development ... 67
7. DISCUSSION AND CONCLUSION... 68
7.1 Discussion of Results ... 68
7.1.1 Institutional Capacity Development ... 68
7.1.2 Enterprise Capacity Development ... 69
7.1.3 Impacts on Socio-Economic Development ... 70
7.2 Conclusion ... 70
7.2.1 Conclusion ... 71
7.2.2 Limitations ... 73
7.2.3 Implications for Further Research ... 74
GLOSSARY OF ACRONYMS
ADP Area Development Plan
AUS AID Australian Government Overseas Aid Program
BAPPEDA Indonesian Local Planning Authorities
BAPPENAS Indonesian National Development Planning Agency
BLUDD Micro Finance Institute South-East Sulawesi
BUPATI Mayor in Bahasa Indonesia
CB Capacity development
CDP City Development Plan
CIDA Canadian International Development Agency
CIPP Evaluation Context-, Input-, Process-, Product Evaluation
GDP Gross Domestic Product
GTZ Deutsche Gesellschaft für Technische Zusammenarbeit
HDI Human Development Index
IA Impact Assessment
ILO International Labour Organization
IMF International Monetary Fund
ITB Institute of Technology Bandung
JICA Japan International Cooperation Agency
KPEL Kemitraan Pembangunan Ekonomi Lokal Intervention
KT Knowledge Transfer(s)
LCD Local Capacity Development
LED Local Economic Development
LERD Local Economic Resource Development Intervention
LGAs Local Government Authorities
MDGs Millennium Development Goals
NESO Netherlands Education Support Office
NGOs Non-Governmental Agencies
PARUL Poverty Alleviation through Rural- Urban Linkages Intervention
RDP Resource Development Plan
REDS Regional Economic Development Support Intervention
RUG University of Groningen
SEED Social Enterprise for Economic Development Intervention
SBG Small Business Group
SFG Shrimp Farming Group
TOR Terms of Reference
UI Universitas Indonesia
UN United Nations
UNDP United Nations Development Programme
URA Urban and Regional Affairs Directorate
WB World Bank
LIST OF FIGURES
FIGURE 3.1 Conceptual Model
FIGURE 6.1 LCD Sulawesi: Statement of Relationships
LIST OF TABLES
TABLE 3.1 Local Capacity Assessment Model
TABLE 5.1 Degree of Local Capacity Development: Sulawesi
LIST OF MAPS
A PRECIOUS HUMAN LIFE
Every day, think as you wake up: "Today I am fortunate to have woken up. I am alive; I have a precious human life. I am not going to waste it. I am going to use all my energies to develop myself, to expand my heart out to others, to achieve enlightenment for the benefit of all beings. I am going to have kind thoughts towards others. I am not going to get angry or think badly about others. I am going to benefit others as much as I can".
H.H. the XIV Dalai Lama
1. INTRODUCTION
1.1 Setting the Scene – Development Paradigms in a Nutshell
The economic and social development of developing countries1 became a policy objective of developed countries since the end of the Second World War (Thorbecke, 2006). Since then, a vast amount of scholarly attention focused on how to bring prosperity to developing countries (Rostow, 1960; Kahn, 1979; Evans, 2003; Leys, 2005). Two perspectives mainly divide the development debate in the past and current eras. On the one hand, there are theorists and practitioners holding a plea for massive one-size-fits-all investment approaches in order to eradicate poverty (Rostow, 1960; Sachs, 2005). On the other hand are scholars with the aim to find situation-specific structural approaches in order to improve the lives of the people in developing countries (Kahn, 1979; Easterly, 2002, 2006). The former are short-term oriented, namely to eradicate poverty, whereas the latter are long term oriented: focused on solutions towards sustainable socio-economic development.
The logic behind massive one-size-fits-all development approaches – in particular popular in the first decades after the Second World War – is the assumption that developing countries are characterized with abundant labour supply and lack of capital, which results in capital being the scarce factor of production in these countries. With a capital-investment
1 Developing Countries: Collecting term for countries facing common characteristics like (Szirmai, 2005:29):
Widespread poverty and malnutrition
A relatively large share of agriculture in output and employment Pronounced dualism in economic structure
Very rapid growth of population Explosive urbanization
Large-scale underutilization of labour Political instability, pervasive corruption Environmental degradation
boost in a short period of time, it is assumed that developing countries will be able to set the flywheel of sustained economic development in motion. Developing approaches emphasizing investment boosts are often called big push theories (Lewis, 1954; Rosenstein-Rodan, 1957; Rostow, 1960). Current development approaches including some sort of big push theory can be seen in the policy objectives of the United Nations Millennium Development Goals (UN MDGs). The objective of the UN MDGs is to eradicate global poverty by half in 2015 (Szirmai, 2005; Easterly, 2006). According to Sachs (2005), one of the founders of the UN MDGs, the UN MDGs will be achieved provided that the rich countries give developing countries a single investment boost in money and technology to develop their agricultural sector, built infrastructure, provide basic health services and provide education.
Development approaches with the aim to find situation-specific structural approaches argue that all massive development approaches since the end of the Second World War failed to deliver their great ambitions. The propelling force behind this ideology is William Easterly. Easterly (2002) explains that most developing countries that were treated most intensively with the various development approaches (e.g. sub-Saharan African countries) failed to achieve the expected economic growth. Besides, Easterly (2002; 2006) points at the disappointment for both development organizations, the Western public and developing countries, if short-term oriented massive development programs do not deliver their expected results. According to advocates of the situation-specific structural approaches, a smaller in-depth focus is more likely to achieve sustainable economic development (ibid). Analyses to comprehend why differences in development patterns have occurred in different parts of the world lie at the heart of situation-specific structural approaches (Szirmai, 1993). Insights in historical development paths help to identify the factors that explain different patterns of development. Some general factors that influence development patterns ought to be: the accumulation of production factors, technological changes, external political and economic influences, the development of institutions and cultural differences (Szirmai, 2005:3). In sum, the underlying notion is that for sustainable economic development to occur, one has to identify what specific development approach is required for regions or countries based upon a profound analysis of the characteristics2 of that specific region or country (Easterly, 2002)3.
2
See before (Szirmai, 2005: 3)
3 For those interested in the development debate in the present era please consult the books of Sachs (2005)
1.2 Scope of Research – A Focus on Local Capacity Development
A gradual shift of attention in development theories can be unravelled based upon prior experiences with development failures and successes. At present, it is widely accepted that for regions to compete in today‟s globalized context, capacities at local and regional levels should be increased (Humphrey and Schmitz, 2008; Morgan and Henderson, 2002; Sinister and Smith, 2010). For this reason, scholars and practitioners increasingly pay attention to local and regional development practices as an alternative to massive one-size-fits all investments (Szirmai, 2005; Swinborn, Goga and Murphy, 2006; Pike, Rodríguez-Pose and Tomaney, 2006).
1.2.1 Influenced by Processes of Globalisation and Decentralisation
1.2.2 Local Capacity Development Interventions
Despite the threats of globalisation for uncompetitive regions, local and regional communities can benefit from increased levels of globalisation when local and regional development approaches aim to enhance local capacity development (LCD), whereby localized learning allows to respond and adjust to global challenges (Simister and Smith, 2010). Therefore, individuals, firms and territories have to be endowed with the factors that will allow them to place their skills, products or services in the global marketplace and to compete with others (Pike et al., 2006). Several studies (Helmsing, 2001; Swinborn et al., 2006; Pike et al., 2006) claim that policies to stimulate LCD need to be structured around two axes. The first axe is the development of hard infrastructures like transport facilities, whereas the second axe consists of the generation of soft support for networking and knowledge transfer (KT). The combination of successful implementation of hard infrastructures together with soft support for networking and KT fosters collective knowledge creation, application, and learning of local institutions and other actors in the target area and is likely to result in increased local capacities (Morgan, 1997; Storper, 1997; Morgan and Henderson, 2002). In addition, on the enterprise and community level, improved capacity encourages industry and business development, which subsequently results in improved quality of life for the local community (Swinborn et al., 2006).
1.2.3 Acknowledged by Leading Institutions
1.3 Gaps in Literature
Despite the fact of increased recognition for LCD as being a form of proper development intervention in developing countries (Helmsing, 2001; Pike et al. 2006; Swinborn et al. 2006) and being widely applied (ILO, 2010; World Bank, 2010); four gaps in existing research are identified. First, existing research on LCD does not address the process of how KTs result in increased local capacities. Second, the impact of LCD-interventions on local capacities and consequently on local socio-economic development are often unclear. Third, to our knowledge, no single research has ever constructed a model through which the impact of LCD-interventions on local capacities and on local socio-economic development can be assessed. Finally, no studies examine barriers and facilitators about the impact of LCD-interventions.
1.3.1 The Process of Local Capacity Development
Processes of LCD depend explicitly on the ability to transfer knowledge to local stakeholders (Storper, 1997; Morgan and Henderson, 2002). To understand the process of LCD it is therefore valuable to reveal how KTs result in increased LCD.
Joshi, Sarker and Sarker (2004) explain that knowledge will be transferred when knowledge diffuses through the process of socialization, education, or learning from one entity to another. A vast amount of literature exists about capacity development through knowledge transfers (Nonaka, Toyama and Konno, 2000; Nonaka and Toyama, 2003; Ju, Ju and Tran, 2008; Teigland and Wasko, 2009; Lucas, 2006; Dyer and Hatch, 2006). However, all capacity development theories refer to capacity development of individuals or organizations (Argote, Ingham, Levine and Moreland, 2000; Alavi and Leidner, 2001; Kane, Argote and Levine, 2005). The need for enhanced understanding of KTs on LCD is in place because it is considered more complicated to transfer knowledge to increase local capacities (Davis, 2006; MkNelley et al., 1999). Increased complexity exists since knowledge has to be transferred to multiple stakeholders, e.g. individuals, households, enterprises, communities and institutions (Davis, 2006; Hulme, 2000; Woller, 2004).
1.3.2 The Impact of Local Capacity Development-Interventions
outcomes. In addition, Swinborn et al. (2006) point at the need to regularly review LCD-interventions to reflect changes in the local economy and lessons learnt from its implementation. Emphasis on analysing the outcome of LCD-interventions requires the assessment of impacts on individual, household, enterprise, community and institutional levels (Davis, 2006; Hulme, 2000; Woller, 2004).
Some studies exist which examine the impact of LED-interventions (Coleman, 2001; Khandker, 2001; MkNelly et al. 1999). These studies provide recommendations to assess the impact of LED-interventions. Nevertheless, all aforementioned LED-impact assessment studies focus on the assessment of impacts of micro-finance-based LED-interventions instead of LED-interventions. It can be argued that the impacts of LCD-interventions, e.g. increased local capacities, are less tangible to assess than the impacts of micro-finance LED-interventions, which can be assessed via tangible economic indicators (Khandker, 1998; Swinborn et al., 2006). Therefore, it needs justification that methods applied to assess the impact of financial-based LED-interventions can be applied to assess the impact of LCD-interventions as well.
1.3.3 Recommendations to Assess the Impact of Local Capacity Development-Interventions
Although limited, some studies examined the indicators for successful KT to stimulate LCD (Dewi, 2010; Goldman, 2005; Woller, 2004). Goldman (2005) developed a framework to monitor and evaluate LED-interventions according to guidelines of the World Bank, while Dewi (2010) proposed indicators to examine LCD in Indonesia. The strength of Goldman‟s (2005) and Woller‟s (2004) framework is the incorporation of indicators to assess impacts at multiple levels, e.g. individual, household, community, enterprise and institutional.
1.4 Objectives and Contribution
The contribution of providing insight in the impact of LCD-interventions is of managerial and theoretical relevance. Of managerial value since many LCD-interventions have been – and still are – implemented in Asia, Latin- America, the Middle- East, and Sub- Saharan Africa over the years (ILO, 2010; World Bank, 2011), which include numerous failures (World Bank, 2010). Since LED-interventions are initiated at large scales, it is valuable to determine the impact of LCD-interventions on LCD and on local socio-economic development, while LED practitioners can use the results in the development of future LCD-interventions. The theoretical contribution is that insight in the impact of LCD-interventions on LCD and socio-economic development contributes to the intensified development debate. The aforementioned results in the following two-fold main research question:
1a. “What is the impact of local capacity development-interventions on local
capacity development and on local socio-economic development?”
1b. “How are differences and similarities in impact of LCD-interventions
explained?”
1.5 Feasibility
1.6 Research Structure
2. RESEARCH DESIGN
This chapter presents the design of this study. Section 2.1 introduces the problem statement. In addition to the problem statement, section 2.2 provides a short examination of the fundamental processes of conducting research. Finally, sections 2.3, 2.4 and 2.5 present the research classification, the research strategy and the research methods respectively.
2.1 Problem Statement
De Leeuw (2000) provides several hands-on guidelines for formulating the problem statement. The problem statement consists of four elements, namely: the research objective; the main research question; the different sub-questions and the demarcations of the research. This section elaborates on the four elements of the problem statement.
2.1.1 Research Objective
The research objective of the study is four-fold. The first objective is to conceptualize the role of LCD-interventions on processes of LCD. The second objective is to develop a „Local Capacity Assessment Model‟. The third objective is to assess the impact of LCD-interventions on LCD and on local socio-economic development at Sulawesi. Finally, the fourth objective is to theorize based upon barriers and facilitators detected in the three case-studies to increase insight in the processes that determine the impact ex post LCD-interventions on LCD and on local socio-economic development at Sulawesi.4
2.1.2 Main Research Question and Sub-questions
As mentioned in the introduction the two-fold main research question of the present study is:
1a. “What is the impact of local capacity development-interventions on local
capacity development and on local socio-economic development?”
1b. “How are differences and similarities in impact of LCD-interventions
explained?”
4 Important to acknowledge is that it is not the intention to generalize the emerging theory about barriers and facilitators towards LCD to
In order to answer the two-fold main research question, four sub-questions need to be addressed. An important prerequisite for a profound understanding of the role of KT via LCD-interventions on the process of LCD and on local socio-economic development is an understanding of these concepts. This results in the first sub-question:
SQ. 1. “What is the role of knowledge transfer in local capacity development?”
Once insights have been obtained into the theoretical framework of the research, a model needs to be developed to assess the impact of LCD-interventions on LCD and on local socio-economic development. Therefore sub-question two will be:
SQ.2. “How would a model look like capable of assessing the impact of LCD-interventions on local capacity development and on local socio-economic development?”
Subsequently, during field research in the case-studies context at Sulawesi, the model is applied to assess the impact of LCD-interventions on LCD and on local socio-economic development. This results in sub-question three:
SQ.3. “What is the impact of LCD-interventions at Sulawesi?”
Based upon the conceptual relationships between the findings in three case-study contexts, a theory will emerge, which explains the impact of LCD-interventions on LCD and on local
socio-economic development at Sulawesi. The results and analyses of the data result in the development of sub-question four:
SQ. 4. “What factors determine the impact of LCD-interventions on local socio-economic development”
The answers on the sub-questions will result in being able to answer the main research question satisfactorily.
2.1.3 Demarcations of the Study
composed based upon local initiatives.5 The stakeholders come from one rural region and aim to foster the development of one vital sector for their region. Via the LCD-interventions, teams receive knowledge in the field of business and management and governmental planning from universities. The output delivered by the teams is an Action
Plan in which five-year activities are outlined which should foster the development of the
selected sector as well as to foster further local socio-economic development. The intention is that teams are able to implement the action plan based upon increased capacities acquired during the knowledge-based LED-intervention. Once the team returns in their region, the aim is that the newly acquired knowledge of the teams disseminates among other local stakeholders to increase local and regional capacities (Wolfard, 2009: 12-21).
The LCD-interventions in which the RuG has been involved from 2004 to 2009 are labelled „Local Economic Resource Development‟ (LERD) (Wolfard, 2009; Farny, 2009; van Leeuwen, 2009), while LERD evolved into „Regional Economic Development Support‟ (REDS) in 2009 because of format changes of the intervention (Dewi, 2010).
In sum, the interventions selected in the present study are limited to LCD-interventions in Indonesia. To limit the influence of externalities LCD-LCD-interventions at one island, namely Sulawesi, form the demarcations of the present study. To sensitize for different impacts over time, three LCD-interventions from 2007, 2008 and 2009 are selected.
2.2 Research Processes
In addition to the four elements of the problem statement as introduced by de Leeuw (2000), Thomas (2006: 14) identifies two fundamental processes of research: describing and explaining. According to Thomas (2006), it is detrimental for the understanding of phenomena to start research with describing the phenomenon. Descriptions can be gathered by obtaining data by, for example, observing, and subsequently recording the observations. The resulting descriptions provide answers on „what‟ questions. The descriptions do not explain anything by themselves but they serve as important input for the explanatory process. Without descriptions of phenomena, there is nothing to explain. This process of describing phenomena is known as „intelligence gathering‟ (Phillips and Pugh, 2000). The second process of research is asking „why‟ questions, the explanatory part of research. Different styles of explanatory research can be
5 Prior to 2009 Bappenas selected the teams while since 2009 the Indonesian partner universities are
applied, but in general, the main distinction is between quantitative and qualitative explanatory approaches. Irrespective of the chosen approach, researchers try to produce high-quality explanations, which can explain past behaviour, events, and that can perhaps predict future behaviour and events accurately (Thomas, 2006: 15-16).
Since well- conducted research requires both descriptive and explanatory research, this study will make use of both research processes. The decision to adopt a qualitative explanatory approach for this study is clarified in section 2.5.
2.3 Research Classification and Design
This study can be classified as partially deductive and partially inductive. The first part of the main research question calls for descriptive processes. To assess the impact of LCD-interventions, recommendations from earlier studies to assess the impact of micro-finance LED-interventions are adopted. Therefore, the first part of the research can be classified as deductive. The second part of the main research question is explanative, namely to discover the underlying facilitators and barriers to LCD and local socio-economic development via LCD-interventions. The theory will emerge from data obtained from the three case-study cases. For this reason, the second part of the research can be classified as inductive.
inductive reasoning (Eisenhardt, 1989; Eisenhardt and Graebner, 2007 and Strauss and Corbin, 1998). Since the collected data will play a prominent role in the recognition of patterns between the case-studies in this study, it deserves recommendation to spend some words about case-study research in the next sections.
2.3.1 Pros and Cons of Case-Study Research
Yin (1994) summarizes the value of case-studies as research strategy as follows:
“Case-studies are rich, empirical descriptions of particular instances of a phenomenon that are typically based on a variety of data sources.”
Since theory- building strategies from case-studies are deeply embedded in rich empirical data, building theory from cases is likely to produce theory that is accurate, interesting and testable (Eisenhardt and Graebner, 2007). Although case-studies are sometimes criticized as being subjective, well-conducted theory building from cases is in practice surprisingly objective. For researchers are closely adhered to the data, they will remain honest (ibid).
A second point of criticism about case-studies as research strategy is the lack of internal validity due to an investigator bias. An investigator bias can influence what is observed, and reported. Besides, case-studies are criticized for the impossibility of replication (Thomas, 2006). To avoid investigator bias, this study makes use of
triangulation. Triangulation is a strategy in which different methods are used to collect the
necessary data and strengthens the internal validity of the case study (Gill and Johnsson, 2002; Thomas, 2006: 131; Yin, 1994). Section 2.5 elaborates on the different methods applied in the data collection stage.
2.4 Strategies for Data Collection
The research strategy of the present study can be classified as ethnographic. The ethnographic strategy is adopted to describe LCD-interventions at Sulawesi, since the ethnographic strategy is a research strategy with the goal of obtaining a broad understanding of phenomena (Thomas, 2006). The application of the ethnography strategy is to observe the objects of the study, in the present study the stakeholders in the case-study regions at Sulawesi. The strength of the ethnographic research strategy is to describe and explain patterns of human behaviour by observing a phenomenon. This strategy can be brought into practice in three distinct ways: (1) ask people what they are doing and why; (2) consult written and other records of what people have done and (3) observe what they do (ibid).
2.5 Research Methods
The methods applied for this study are qualitative in nature in order to receive an in-depth understanding of the processes underlying LCD, and local socio-economic development that result from LCD-interventions. Different methods are used for the data collection, which allows comparing the results of different methods, i.e. triangulation (Gill and Johnsson, 2002). Eisenhardt and Graebner (2007) argue that a rich variety of data collection methods can be applied when conducting case-study research. These data sources include interviews, archival data, survey data, ethnographies, and observations. In addition, Lloyd-Evans (2006) acknowledges the value of focus group meetings in qualitative research. This section presents the range of methods applied in this study.
2.5.1 Descriptive Review
The literature review presents a descriptive literature review of terminology, and the evolution of earlier development interventions towards LCD-interventions. Finally, the literature review provides the theoretical framework of the present study. Scientific literature and reports are consulted to introduce the most important constructs LED, LCD,
KT, LERD/REDS and IA required to develop the conceptual framework and LCAM.
2.5.2 Ethnographic Methods
ethnographic methods are used to obtain data during the field research at Sulawesi. The ethnographic methods used for the present study are observations, informal interviewing, focus group discussions and qualitative analyses. Since impacts occur over time and long-term participant observations are preferred in ethnographic strategies; the recommended method would be a longitudinal study, which would involve data collection over different points of time (Woller, 2004: 414; Thomas, 2006). Because of limited resources, of time and money, such a measurement in time was not possible. Therefore, this study entails a cross-sectional approach, in which data is collected in three areas at different times after completion of LCD-interventions.
2.5.3 Case-Study Methods
The third set of methods applied for the data collection stage is the method of informal and semi-structured interviews with stakeholders involved in LCD-interventions. The foremost challenge of interview data is to limit bias (Thomas, 2006). A key approach to limit bias in interviews is to use numerous and highly knowledgeable informants who view the focal phenomena from diverse perspectives. It is unlikely that these varied informants will engage in convergent retrospective sense making and therefore bias is limited (Eisenhardt and Graebner, 2007). Key stakeholders involved in LCD-interventions in Indonesia with different perspectives are the sources of knowledge (RuG, ITB and UI); the team of recipients (multi-sector); the public sector (Bappenas, Bappeda); the non-governmental sector (Indonesian universities, NGOs) and the private sector (local producers of raw materials and sector related enterprises). Semi-structured interviews are used to assess the impact of LCD-interventions on LCD and on local socio-economic development.
For the data collection stage, in total, 19 interviews, 11 focus group discussions, multiple field-visits, and numerous informal discussions are held with a wide variety of stakeholders in three case-study contexts in different geographical locations, related to different commodities and from three different years of initiating LCD-interventions. It is unlikely that this wide variety of participants will engage in convergent retrospective sense making and therefore bias is limited. To reduce the chance of bias further, the data collection stage is complemented with information from local reports.
possible research leads, focus group discussions were organized in the early stages of research per case study with various stakeholders. Finally, to verify results, results were discussed with key intervention-stakeholders, e.g. Bappenas, ITB and UI.
2.5.4 Synoptic Review
A synoptic review is applied based upon the most significant conceptualizations discovered from the three case-studies at Sulawesi. The purpose of the synoptic review is to provide a concise but accurate overview of all the material that should be considered relevant with respect to the research questions. The synoptic review is both descriptive and evaluative (Thomas, 2006: 74).
3. LITERATURE REVIEW
Based upon the work of influential scholars in the field of development studies, definitions of capacity development will be presented. Secondly, this literature review will introduce the need for LCD as a local economic development tool. Finally, by means of an assessment of current literature on local economic development, the input variables of the LCAM will be identified.
3.1 Terminology
The term capacity development can be interpreted in several ways. The OECD (2006:8) states that capacities are: “The ability of people, organizations, and society as a
whole to manage their affairs successfully”; while Fowler et al. (1995: 4) define
organisational capacities as: “The capability of an organization to achieve effectively what
it sets out to do”.
The definitions of capacities adjusted to the multiple scales within regions, we define local capacities as: “A region’s combined set of individual, institutional, enterprise,
household and community resources which determine its ability to achieve what it sets out to do”.
Capacities can be increased when knowledge is transferred successfully from source to recipients (Cummings, 2003). Knowledge is perceived as the most strategically important resource, which organisations possess in the current information age where organisations continually have to learn and innovate to remain competitive (Cummings, 2003; Grant, 1996; Inkpen and Tsang, 2005; Joshi et al., 2004 and Nonaka, 1994). The classical way to introduce any subject with the aim to build on existing stocks of knowledge about knowledge is to distinguish between data, information and knowledge (e.g. Argote and Ingram, 2000; Boer, 2005; De Long and Fahey, 2000; Nonaka, 1994). Boer (2005: 18) concludes upon analysis of various definitions that “Data is raw numbers
and facts, information is processed data, and knowledge is authenticated information”.
Polanyi (1966:4) distinguishes between „explicit‟ and „tacit‟ knowledge, e.g. explicit: “Codified knowledge which is transmittable in formal, systematic language” and tacit: “Personal quality, deeply rooted in action, commitment and involvement in a specific
context which makes it hard to formalize and communicate”. For long it was believed that
(McDermott, 1999). However, some recent evidences support that knowledge can be embedded in communities within organizations as well, besides in individuals only, e.g. the social perspective of knowledge (Orr, 1996; Wenger, 1998).
After all, as De Long and Fahey (2000: 114) stated, three types of knowledge, „human, social and structured knowledge‟ can be defined. The first type, human knowledge, constitutes what individuals know or know how to do. Human knowledge expresses skills or expertise and usually consists of both tacit and explicit knowledge. Secondly, social knowledge is knowledge, which exists in relationships between individuals or within groups and is commonly referred to as „social capital‟ (Putnam, 1993). Social knowledge is largely tacit, develops by working together (De Long and Fahey, 2000) and forms the basis for the accumulation of human capital (Westlund and Bolton, 2003). Woolcock (1998) defines social capital as: “The information, trust, and
norms of reciprocity inherent in one’s social networks”. The third type, structured
knowledge is knowledge embedded in organization‟s systems, processes, tools, and routines. This form of knowledge is explicit and rule-based. The key distinction between structured knowledge and human- and social knowledge is that it exists independently of human knower‟s; instead, it is an organizational resource (ibid).
Nonaka (1994: 22) postulates that the prime mover in the process of organizational knowledge creation is the enlargement of knowledge of individual‟s within organizations. Individuals accumulate tacit knowledge through direct hands-on experience. The interaction between knowledge of experience and rationality enables individuals to build their own perspectives of the world. Subsequently, knowledge can be transferred into information once it is articulated and presented in the form of text, graphics, words, or other symbolic forms (Alavi and Leidner, 2001).
Besides the distinctions in purpose and process of local capacity development interventions, the analysis of impacts matter as well. IAs can prove achievements, and provide insight in how to improve the effectiveness and efficiency of interventions. IA is not just another word for evaluation. Evaluations focus on intervention „inputs, activities, outputs and outcomes‟ (Goldman, 2005; Stufflebeam, 2003), while IAs emphasize the latter stage of evaluations, namely the outputs and outcomes of interventions (Hulme, 2000). Impacts of LCD-interventions can be studied at the individual, household, enterprise, community and institutional level (Hulme, 2000, Woller, 2004; Davis, 2006).
section introduces the need for local capacity development and discusses criteria for impact assessments.
3.2 Plea for Local Capacity Development
A wide range of development interventions with varying degrees of public-, private-, and non-governmental sector involvement have been introduced starting from the end of World War II until present (Hyden, 1994; Thorbecke, 2006). The present section places present LCD-interventions in their historical context.6
3.2.1 Top-Down Development Interventions until the 1980s
Until the 1970s, development interventions relied on large central government planning (Hyden, 1994). Between 1955 and 1965, there was a growing acceptance of instruments for macroeconomic planning. Huge public investments were spent on industrialization and the modernization of agriculture. Entrepreneurs and large-scale producers were expected to take the lead in the modernization of agricultural and industrial sectors and thereby to encourage other sectors in the country to follow suit7. This strategy is labelled trickle down since the primary objective was to invest in a relative wealthy minority with the expectation that this group would take the lead in the development of the country and that wealth would trickle down to other groups of the population.
The primary objective of early development interventions was to attain economic growth (Eckstein, 1957; Fei and Ranis, 1964; Pike et al., 2006). Other economic and social objectives were perceived to be complementary to – if not resulting from – gross domestic product (GDP) growth (Thorbecke, 2006). However, during the 1960s, it became apparent that the trickle down strategy yielded disappointing results for the poorest people in societies. Therefore, the development ideology between 1965 and 1975 shifted towards the fulfilment of basic needs rather than attaining economic growth per se. The basic needs development approach emerged based upon the assumption that without satisfaction of basic needs, poor people could not participate fully in development. As a result, more emphasis was given to social development interventions like primary education and primary health care. In other words, the primary development objective changed from
6 It is not the intention to be comprehensive in this section. The aim is to provide a general understanding of
the developments in the development debate towards an emphasis on local capacity development. For a complete and detailed overview of development strategies please consult the articles of Hyden (1994) and Thorbecke (2006)
7 Capital accumulation is considered one of the important means to increase labor productivity in modern
solely generating economic growth towards economic growth complemented with attempts to raise the standard of living of the poor (Little and Mirrlees, 1974) and poverty alleviation (Thorbecke, 2006). Despite a shift from development interventions targeted at attaining economic growth towards emphasis on basic needs fulfilment; the perception of human beings in developing countries as passive and dependent did not change (Kaag et al., 2004). The public sector remained the key institutional actor in initiating development interventions. However, more emphasis was given to the decentralisation of government responsibilities (Hyden, 1994).
3.2.2 Reliance on Private- and Non-Governmental Sectors in the 1980s
The role of the public-sector in development interventions became restricted during the 1980s as part of the political hegemony of neo-liberalism, in favour of a large role in the development process for private- and non-governmental sectors (Hyden, 1994; Ruttan, 1996). At the same time, the development and aid environment radically changed at the beginning of the 1980s due to severe debt crises in most countries of Africa and Latin- America and some countries in Asia. Under high pressure of the International Monetary Fund (IMF) and the WB, the main policy objective of governments of developing countries became macroeconomic stability. Under the influence of ideological changes in the developed world, developing countries were strongly encouraged to rely on the operation of market forces and in the process to minimize government activities in most spheres (Thorbecke, 2006). In the economic sector, the IMF and WB insisted on structural adjustments programs (SAPs) towards reliance on market mechanisms. The expectation was that structural adjustment would result in greater incentives for producers to engage in market transactions and that these incentives would result in higher levels of production and national economic growth (Hyden, 1994). Nevertheless, the instant reliance on market mechanisms with little regulation and market supporting mechanisms did not increase private sector investments in many developing countries. Markets did not function since the institutional environment in many developing countries was not conducive to private sector development (Helmsing, 2003).
became apparent that the highly diverted, locally based, grassroots organizations could not make much of a difference to development unless they were incorporated into broader institutional networks (Hyden, 1994). Therefore, intermediary organizations 8 were developed with the intention to support grassroots initiatives through the provision of credit and technical and managerial advice.
3.2.3 Dividing Responsibilities and a Focus on Human Development 80s-2000
In this era, the proper role partition between governments and the market was highly debated. The neo-institutional- and public choice schools argued that the state could affect development outcomes in a number of ways. First, the state could provide incentives towards conducive macro- and microeconomic environments to stimulate economic activity. Secondly, the state could provide the institutional infrastructure – property rights, peace, law, order, and rules that would encourage long- term investment. The third role assigned by the neo-institutional and public choice schools to states was ensuring the delivery of basic education, health care and infrastructure required for economic activity (Commander et al., 1996).
Moreover, starting from the mid-1980s, it was acknowledged that low levels of human capital endowment were the primary obstacle to the achievement of the potential scale economies that might come through industrialization. Technical progress could only result in increased industrialization if human capital and knowledge were in place, leading to increased returns on investments. The human capital perspective is called the endogenous growth school (Lucas, 1988; Romer, 1990). In addition, a number of influential theoretical contributions in the development debate came from Amartya Sen in the 1980s and 1990s. It was Sen‟s capabilities approach (Sen, 1985); which moved the debate away from narrow utilitarian perceptions of economic development towards a social, economic, and political analysis of the well-being of persons (Deneulin and McGregor, 2009). The emphasis in Sen‟s capability approach is placed on a person‟s freedom to decide what is valuable to do according to the person himself (ibid). Hereby Sen changed the commonly accepted perception of human beings in developing countries as passive and dependent, to active and contributing to their own development based on their strengths and capabilities (Murray, 2000; Kaag et al., 2004). As Giddens (1984: 1-16) states:
“Social actors are knowledgeable and capable. They attempt to solve problems,
learn how to intervene in the flow of social events around them, and monitor continuously their own actions, observing how others react to their behaviour and taking note of the various contingent circumstances”.
The influence of Sen‟s „capability approach‟ became apparent in 1990 when for the first time human development was measured alongside earlier economic measures as GDP per capita in the United Nations Development Programme (UNDP) report. This resulted in the adoption of the Human Development Index (HDI) to measure development, which consequently replaced GDP per capita as sole measurement tool for development (Deneulin and McGregor, 2009).9
The new emphasis on human beings in developing countries as active contributors to their own development allowed the concept of social capital to emerge (Putnam, 1993)10. Socially excluded-, marginalized-, or systematically discriminated individuals, households or groups that partake in social networks can rely on the support of networks. It is argued that networks can bring benefits in terms of provision of informal credit and can help in the search for employment (Putnam, 1993), which can help to escape poverty (Portes, 2000; Thorbecke, 2006).
3.2.4 Development Debate in the 21st Century
It has been argued that the development community has run out of big ideas in the new millennium (Lindauer and Pritchett, 2002). The present century so far can be marked as providing a critical re-evaluation and consolidation of previous concepts and techniques as opposed to the formulation of brand new ideas per se. The most important contribution in the development debate is the development of techniques to evaluate the effectiveness of development interventions. The main objective of these evaluations is to determine how individuals who participated in the intervention would have fared in the absence of the program (Duflo and Kramer, 2003; Thorbecke, 2006).
Besides the development of adequate evaluation techniques, improvement in human development remains the ultimate goal of interventions. Moreover, development interventions gradually evolved from solely economic based interventions towards more socially embedded economic interventions. In line with Sen‟s contribution (1985),
9
The Human Development Index consists of three measurement criteria, namely life expectancy at birth, average years of education and GDP per capita (Szirmai, 2005).
consensus exists that equal income and wealth distribution is consistent with and conducive to growth (Thorbecke, 2006). From the mid-1990s onwards ecological, political and cultural context of regions were embedded in development interventions (Geddes and Newman, 1999; Keating, 2005). In the present century more emphasis is given to education and health (ibid); poverty and inequality reduction (Haughton and Counsell, 2004) and on promoting inclusive government and governance (Keating, 2005; van Lindert, 2008). At present, even broader notions of quality of life, social cohesion and well-being are integral to interventions to stimulate economic competitiveness and growth of remote rural areas (Geddes and Newman, 1999; Morgan, 2004).
In sum, earlier development debates shaped the present attention for LCD-interventions by re-acknowledging the facilitative roles states can fulfil in development when operating efficient; by raising awareness of the active roles local actors can play in their own development and by placing emphasis on the role of human development via social networks.
3.3 Theoretical Framework
The theoretical framework of this study is built generally on the recognized earlier recommendations to assess impacts of micro-finance LED-interventions and particularly on current literature on LCD in developing countries.
3.3.1 Earlier literature on Micro-Finance Impact Assessments
IAs of micro-finance LED-interventions are sparsely available (e.g. Sebstad, Neill, Barnes and Chen, 1995; Khandker, 1998; MkNelly et al., 1999; Coleman, 2001). IAs can prove achievements, and provide insight in how to improve the effectiveness and efficiency of LED-interventions. As a result, IAs gain popularity by donor agencies, which increasingly need to provide insight in the results of their interventions (Hulme, 2000). However, IAs are not available for LCD-interventions. Therefore, this section examines how IAs should be applied in micro-finance LED-interventions.
3.3.1.1 Evaluations versus Impact Assessments
tool in the 1970s. Stufflebeam‟s evaluation tool consists of Context evaluation, Input evaluation, Process evaluation, and Product evaluation (CIPP) (Stufflebeam, 2003). Context evaluations outline the goal of interventions; input evaluations present the proposed plans to execute via interventions; process evaluations evaluate the actual actions taken during interventions and product evaluations evaluate the outcome (impact) of interventions. In sum, IAs focus specific on the output and outcome part of evaluations.
3.3.1.2 Recommendations to Structure Micro-Finance Impact Assessments Despite being widely applied, conducting IAs is not an easy task. Consequently, the quality and reliability of IA studies vary widely, depending on factors such as skills of facilitators, the motivation of target groups, the applicability of tools to situations and the degree of participation (Hulme, 2000). The main complexity is to demonstrate that impacts found after interventions are caused by the specific interventions. Therefore, IA requires the adoption of research methodologies capable of isolating specific impacts out of a complicated web of causal and mediating factors, as well as attaching specific units of measurement to tangible and intangible impacts (Woller, 2004). For practitioners applying IAs to determine impact of interventions; several guidelines are provided to determine the causal impact of interventions (Hulme, 2000; Woller, 2004). For reasons of transparency, all IA methods have a conceptual framework at their heart. In planned and well-resourced IAs with long lead-in times conceptual frameworks are usually explicitly identified, e.g. Sebstad et al. (1995) and Khandker (1998). Conceptual frameworks should address three elements (Hulme, 2000):
1. The impact chain that the study is to examine,
2. The specification of the unit(s), or levels, at which impacts are assessed, and 3. The operationalisations of the types of impact that are to be assessed11.
1. The impact chain examined in the study. All development interventions have the underlying assumption that interventions change human behaviours and practices in ways that lead to the achievement of desired outcomes (Hulme, 2000). Development interventions can have impact on individuals, households, enterprises, communities and institutions (Hulme, 2000, Woller, 2004; Davis, 2006). Moreover, it is likely that the effect
of development interventions on direct beneficiaries will become a cause for the generation of further effects as well since the beneficiary within the local community is embedded in deep relations with its surroundings, like enterprises, other sectors, and the household.
For instance, training members of a certain local business sector is likely to result in different services provided by their enterprises. As a result, it is likely that these enterprises increase their turnover. Subsequently, increased enterprise turnover results in greater household income. More household income is likely to have effects on level of education and skill levels of household members. Finally, increased education and skills may results in future economic and social opportunities of household members (Hulme,
2000).
Inherent to the previous example is that the assessor of the impact of the intervention needs to make choices about which link(s) in the impact chain to focus on in the assessment (ibid). Two approaches can be applied to determine the impact of interventions, the intended beneficiary school, and the intermediary school. Where the first determines the impact of interventions on the target group and all other related stakeholders in the chain, the latter only determines the impact of interventions on the target group. As such, the intermediary school assumes that changes in behaviour within the target group ultimately results in improved performance in other parts of the impact chain as well. The strength of the intended beneficiary school is that it makes fewer assumptions about impacts on different stakeholders within the impact chain and is able to distinguish if, and how stakeholders benefit. Nevertheless, adopting principles of the intended beneficiary school is demanding in terms of both methodological and cost aspects. The intermediary school on the other hand is less complicated and fewer costs are involved, nevertheless it cannot always taken for granted that impacts on the target groups result in changes of behaviour of other local stakeholders as well (ibid).
2. Levels of assessment. Besides decisions about what links in the impact chain to study, all IAs make choices about the conceptual level to examine the impact of development interventions. Woller (2004) distinguishes between four conceptual levels of study to assess the impact of development interventions, namely enterprise, household, individual and community levels. In addition, Hulme (2000) identifies a fifth conceptual level, namely the institutional level.
Khandker (2001); and multiple levels Inserra (1996) conducted an IA on enterprise and household level while MkNelly et al. (1999) used a combination of enterprise, household, individual and community level in their IA. Hulme (2000) argues that a focus purely on the individual or the enterprise level is of limited value when assessing the impact of interventions. In the case of the individual level, the disadvantage is that most interventions have impacts beyond the individual level, while a sole focus on the enterprise level is of limited value since it is hard to link enterprise performance to the quality of livelihoods. Theoretically, IAs which focus on the household-, enterprise-, individual-, community- and institutional level provide the most comprehensive coverage of impacts and provide a platform to analyse the linkages between the different levels. However, several limitations in this comprehensive approach exist as well since incorporating all five levels in the impact assessment is complex, high costs are involved, it demands sophisticated analytical skills, and it is time consuming (ibid).
3. Operationalisations types of impact. Goldman (2005) and Woller (2004)
provide a number of operationalisations to assess the impact of financial-based LED-interventions at the individual, household, enterprise, community, and institutional level12. Hulme (2000) argues that it is most important that impact indicators are defined with precision and are made measurable.
Several remarks can be drawn to assess the applicability of these recommendations for the purpose of the present study. In micro-finance LED-interventions financial assets are transferred, the impact of such financial interventions can be assessed via tangible economic indicators (Khandker, 1998; Swinborn et al., 2006). On the contrary, in LCD-interventions, knowledge is transferred. Knowledge is often highly tacit, difficult to replicate and not easily purchased (Inkpen and Tsang (2005: 150), which makes it arguably complicated to assess the impact of LCD-interventions. Therefore, there is a need to assess the applicability of the recommendations for today‟s LCD-interventions in developing countries.
3.3.2 Current Literature on Local Capacity Development
Several studies (Stiglitz, 2002; Nissanke and Thorbecke, 2006; Pike et al., 2006) point at the potential threat of increased globalisation on the development potential of developing countries if these countries fail to develop human capital and adopt adequate
institutions. The increased levels of globalisation cause scholars to raise attention for
LCD-interventions to obtain the required human capital to foster socio-economic development (Szirmai, 2005; Swinborn et al., 2006; Pike et al., 2006). The subsequent sections will present input variables for the LCAM.
3.3.2.1 The Transfer of Knowledge
To identify whether knowledge is transferred and resulted in increased human, social, and/or structured knowledge, one should determine the degree to which knowledge is re-created in the recipient (Winter, 1995).
According to Kostova (1999), a proxy to identify the degree of re-creation of knowledge within recipients is the internalisation of knowledge within recipients. Knowledge internalization refers to the degree to which a recipient obtains ownership of,
commitment to, and satisfaction with the transferred knowledge. The concept of ownership
closely relates to control of an object. When recipients have control over objects, and/or knowledge, the more likely they are to invest more of their own ideas, unique knowledge, and personal style in the object/ knowledge, thereby internalising the knowledge (Pierce, Kostova and Dirks, 2001). The second aspect of knowledge internalization, commitment, increases when individuals see the value of knowledge and develop competence in using the knowledge (Leonard-Barton, 1990). The third aspect of knowledge internalization is satisfaction. Recipient satisfaction with knowledge is important because it can reduce the recipient‟s stress (Ettlie, 1986) and resistance levels in adapting and using the knowledge (Leonard-Barton and Deschamps, 1988) as well as reduces the likelihood of the not-invented-here syndrome (Katz and Allen, 1982).
al., 2000). Activities to improve the well-being of a region may include economic development strategies, research, presence of enterprises, growing labour markets, technology initiatives and political lobbying (Beer, Haughton and Maude, 2003).
Related to LCD-interventions, teams of recipients have the responsibility to disseminate the acquired knowledge by making their proposed Action Plan part of the regional development plan of LGAs (Dewi, 2010).
3.3.2.2 The Role of the Public Sector
Because of decentralisation of government responsibilities in large parts of the world, increased emphasis is placed on the roles of local governments to foster local socio-economic development. This important role for local governments brings more responsibilities for local government levels (McEwan, 2003: 469). According to van Lindert (2008: 239), the implications of decentralisation of government responsibilities and increased numbers of urban population are that local governments need to develop – together with local stakeholders – a longer-term vision on development. Therefore, at present, in local and regional development initiatives, LGAs and PGAs are important stakeholders. Nevertheless, as Helmsing (2001:63) describes the role of the state: “Local
governments must realize that they are not in the driving seat when it comes to local economic development”. Helmsing (2001) argues that local development highly depends on
the establishment of partnerships between public-, private-, and non-governmental sectors. Notwithstanding, two important roles for local governments emerge in local and regional development, namely to provide hard- and soft infrastructures. Hard infrastructure development consists of the creation of physical infrastructure like roads, bridges, rails, sewerage, and telecommunication networks. Soft infrastructure is intangible and consists of social, cultural and community facilities and that enhance the quality of life and encourage local industry and business development via local stakeholder cooperation (Helmsing, 2001; Pike et al., 2006; Swinborn et al., 2006: 2-3).
3.3.2.3 The Role of the Private Sector
