How do policy entrepreneurs shape new markets?

By Marleen Dieleman

Quote: “Such an approach challenges the assumption that policies are implemented in accordance with their normative content and instead acknowledges that the interests of a network of powerful policy entrepreneurs influence the policy process.”

The process of formulating, adopting and implementing new policies and rules is normally a highly formalized one with clearly defined entities and responsibilities. However, certain conditions can give rise to the emergence of actors that are normally invisible, who shape the policymaking process. The development of jatropha cultivation in Indonesia is one example of this phenomenon. The rise of jatropha cultivation occurred within a specific global and local context that was proactively shaped by self-interested actors, including farmers, investors, brokers and non-governmental organizations (NGOs). How was this possible?

Scholars across different disciplines, from sociology to economics, often refer to the context in which economic activity is embedded as institutions, which are seen as setting the rules of the game for business (1, 2, 3); institutions encompass formal institutions, policies and legal systems, as well as informal norms and values. For markets to function adequately it is necessary to have in place a certain set of coherent institutions that facilitate economic exchange.

The idea behind this is that, in theory, institutions would condition the behavior of social and economic actors. If all these actors are affected by, and comply with, a similar set of institutional constraints, we would expect them to behave in the same way under stable conditions. Research has found, however, that organizational variety continues within the same institutional settings, as do similarities when operating under different constraints (4). Hence, institutional theory has been criticized for its inability to explain variety and is also unable to account for institutional change.

To address this, the concept of agency, referring to the purposeful actions of actors, has been incorporated into institutional theory. This has given rise to a variety of concepts which denote how actors engage in changing institutions. Within institutional theory the concept of institutional entrepreneurship is gaining attention as a way to describe and better understand organizations or actors that take the initiative to influence institutions to their own benefit (5). Within institutional economics, actors influencing institutions and creating novel markets are seen as property rights entrepreneurs, and they extract rents in areas that were previously unrecognized (6). Within the area of public-policy research a similar concept has been coined: policy entrepreneurs are people who lobby for certain government frameworks that support their cause (7). These terms all refer to self-interested actors attempting to change their regulatory or normative environment to safeguard a self-interest. Actors seeking to alter the institutional context can be companies, individual entrepreneurs, political actors, non-governmental organizations, social groups or common people.

In which circumstances are the opportunities for policy entrepreneurs to play a defining role the greatest? The literature suggests that the opportunities for such proactive behavior are most pronounced if institutions are weak, not well accepted in society, rife with contradictions, new or in transition (8). In other words, such policy entrepreneurs are frequently found, and are more likely to be successful, when operating in developing economies where institutions have lower legitimacy (9), and in new areas of economic activity, including the development of new products or markets, where suitable institutions may be absent or emerging.

These conditions applied to jatropha cultivation in Indonesia, which was a relatively new product without a proven track record on a large scale, and occurred in a country known to have relatively weak institutions for formulating and implementing public policy. The collective research underlying the JARAK program shows how jatropha was promoted by a range of actors, from scientists to NGOs and companies interested in investing in it, both at the global and local level. These actors promoted a narrative of jatropha as a miracle crop that would yield economic, social and political benefits, even though the evidence of these benefits, locally and internationally, was absent or showed mixed results. Locally, a number of individuals and companies spearheaded jatropha cultivation, notably scientists at the Bandung Institute of Technology (ITB), several local companies, agricultural experts, and a number of state-owned enterprises.

The result of the activities carried out by these policy entrepreneurs was that the Indonesian government eventually enacted regulatory and policy frameworks in which jatropha research and cultivation were promoted. In 2006 the Indonesian government adopted a national framework on bioenergy, which included jatropha, and in 2007 the Ministry of Agriculture created a roadmap for jatropha in an attempt to move the new crop forward. Furthermore, the government approved an obligation to adopt biofuels mixed with fossil fuel from 2008. As such, jatropha-related projects received subsidies and other support (e.g. land) from the state and from international donors who engaged in various projects. Because of the efforts of such policy entrepreneurs, the gap between the jatropha miracle crop narrative promoted by these actors and the actual reality on the ground, which indicated limited yields and disappointing economic viability, was not immediately recognized and closed.

 

References

  1. D. C. North, Institutions, Institutional Change and Economic Performance (Cambridge University Press, Cambridge, 1990).
  2. W. R. Scott, Institutions and Organizations (Sage, Thousand Oaks, 1995).
  3. L. G. Zucker, Institutional theories of organization. Annual Review of Sociology 13, 443-464 (1987).
  4. M. S. Kraatz, E. J. Zajac, Exploring the limits of the New Institutionalism: The causes and consequences of illegitimate organizational change. American Sociological Review 61(5), 812-836 (1996).
  5. P. DiMaggio, Interest and agency in institutional theory, in L. G. Zucker (ed.), Institutional Patterns and Organizations: Culture and Environment, pp. 3-21 (Balinger, Cambridge, MA, 1988).
  6. H. Demsetz, Toward a theory of property rights. American Economic Review 57(2), 347-359 (1967).
  7. N. C. Roberts, P. J. King, Policy entrepreneurs: Their activity structure and function in the policy process. Public Administration Research and Theory 1(2), 147-175 (1991).
  8. M. Seo, W. E. D. Creed, Institutional contradictions, praxis, and institutional change: A dialectical perspective. Academy of Management Review 27(2), 222-247 (2002).
  9. D. D. Li, J. Feng, H. Jiang, Institutional entrepreneurs. American Economic Review 96(2), 358-362 (2006).

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How do policy entrepreneurs shape new markets? by JARAK the short history of Jatropha projects in Indonesia, unless otherwise expressly stated, is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

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