Institutional Innovation in Agriculture and Industry Sectors: A Case of Indonesia

The experts believe that the institutions factor is the successful key of the country (Robinson and Acemoglu, 2012). In the economic development point of view, institutional change as same as important with institutional design itself. Institutional change is the permanent process that will always happen. In the institutional change process, institutional innovation is one of the important thing. Institutional innovation is very important because it will accelerate the economic activities and contribute the economic value-added. The institutional innovation process is begun from build-up institutional environment, networking development, institutional arrangement, institutional change, and institutional innovation as the last process. In Indonesia, recently, the economic sector need to be developed institutional innovation are agriculture and industry sectors because both sectors absorb many labour, create value-added, and increasing income (middle-low level of income); therefore the poverty problem, unemployment, and income inequality can be solved. Institutional innovation that is needed in agriculture sector are the development of market information system, the transformation of agriculture to agro-industry, the method of collective plant, the programme of land reform, and the market preparing. While, the institutional innovation in industry sector are strengthening value-added economy, bureaucracy reform, development of new industrial cluster, expansion of export market, and deepening of production process and technology.