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A Transaction Cost Approach to Explain Public Sector Innovation in Secondary Cities of Indonesia and the Philippines

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A Transaction Cost Approach to Explain Public Sector Innovation in Secondary Cities of Indonesia and the Philippines INNOVATIVE CITY GOVERNMENTS: A TRANSACTION COST APPROACH TO EXPLAIN PUBLIC INNOVATION IN MID-SIZED CITIES OF INDONESIA AND THE PHILIPPINES MULYA AMRI NATIONAL UNIVERSITY OF SINGAPORE 2015 INNOVATIVE CITY GOVERNMENTS: A TRANSACTION COST APPROACH TO EXPLAIN PUBLIC INNOVATION IN MID-SIZED CITIES OF INDONESIA AND THE PHILIPPINES MULYA AMRI (M.A., UNIVERSITY OF CALIFORNIA, LOS ANGELES) A THESIS SUBMITTED FOR THE DEGREE OF DOCTOR OF PHILOSOPHY LEE KUAN YEW SCHOOL OF PUBLIC POLICY NATIONAL UNIVERSITY OF SINGAPORE 2015 DECLARATION I hereby declare that the thesis is my original work and it has been written by me in its entirety. I have duly acknowledged all the sources of information which have been used in the thesis. This thesis has also not been submitted for any degree in any university previously. Mulya Amri 12 November 2015 ACKNOWLEDGMENTS I have received substantial inputs, support, and inspiration for developing and completing this thesis. My thesis supervisor, Associate Professor Eduardo Araral, structured my interest in institutional analysis and guided me to think strategically about my research questions, the topics that I intend to explore, and the career that I would like to have as a scholar. He also pointed me towards excellent opportunities. My thesis committee members: (1) Assistant Professor Ora-orn Poocharoen helped me through my early years as a Ph.D student and heightened my appreciation of public management, (2) Assistant Professor Yumin Joo made sure I remain engaged in and informed by the literature on urban studies. Professor Susan Fainstein guided me through my topical qualifying exam on urban development and helped me think critically about city competitiveness and innovation. Professors Michael Howlett, Mike Douglass, Vu Minh Khuong, David Canning (Lee Kuan Yew School of Public Policy - LKYSPP), Paulo Calmon (Universidade de Brasilia), and fellow Ph.D students gave valuable comments and inputs on earlier drafts of the thesis through various seminar/conference sessions. Two events at LKYSPP in 2014 (Policy Innovation Festival and Regional Conference on ASEAN's Emerging Cities) allowed me to learn more about topics related to this thesis and expand my network. Throughout the process, Professors Michael Howlett, M Ramesh, Ora-orn Poocharoen, Wong Marn Heong, Vu Minh Kuong, and Eduardo Araral, as well as Dr. Astrid Tuminez, Dr. Ishani Mukherjee, and Dedy Permadi helped me reflect on the implications of my research topic. LKYSPP allowed me to use part of the Microsoft research grant on ‘ASEAN Smart Secondary Cities’ to fund my fieldwork. McRhon S. Banderlipe helped me in administering the project. Elizabeth Ong Ling Li enabled me to present my research findings to the school community. Agnes Tan Swee Tin provided administrative guidance throughout the Ph.D process. My fellow Ph.D students offered me solidarity, sanity, urgency, and most importantly, laughter. The time spent with Michael Abbey, Sarah Bales, and Reuben Hintz was particularly memorable. Dr. Iftikhar Lodhi, Dedy Permadi, Janet Cuenca, and Lourdes Montenegro continued to keep me motivated. My parents and sister have given unwavering support and inspiration throughout, as have my in-laws. But ultimately, I would not have survived the journey without the love, patience, and presence of Ira, Vai, and Tio. To them, I dedicate my work. 12 November 2015 Table of Contents Summary ............................................................................................................ iv List of Tables ....................................................................................................... vi List of Figures .................................................................................................... viii List of Abbreviations & Terminology .................................................................... ix Chapter 1: Introduction ........................................................................................ 1 1. Hypotheses and Findings ....................................................................... 8 2. Scope and Limitations .......................................................................... 13 3. Structure of the Thesis ......................................................................... 17 Chapter 2: Literature Review .............................................................................. 20 1. Innovation ............................................................................................ 22 a. Defining Innovation ......................................................................... 22 b. Measuring Innovation ..................................................................... 24 c. Unique Traits of Public Innovation .................................................. 26 2. Dominant Explanations: Leadership and Society ................................. 29 a. Leadership, Actors, Agents .............................................................. 29 b. Society, Institutions, Structure ........................................................ 35 c. Assessment...................................................................................... 43 3. Proposed Explanation: Transaction Costs ............................................ 45 a. Characteristics of Transaction ......................................................... 46 b. Types of Transaction Cost ............................................................... 48 c. Assessment...................................................................................... 54 Chapter 3: Methodology .................................................................................... 56 1. Analytical Framework .......................................................................... 57 a. Outcome: Public Innovativeness ..................................................... 58 b. Explanatory Factors: Leadership and Society ................................. 60 c. Explanatory Factors: Transaction Cost ............................................ 63 2. Research Design ................................................................................... 68 a. Case Selection ................................................................................. 71 b. Data Collection ................................................................................ 83 c. Data Analysis ................................................................................... 87 3. Quality Considerations ......................................................................... 93 i a. Reliability ......................................................................................... 93 b. Validity............................................................................................. 95 Chapter 4: Philippine Cases .............................................................................. 101 1. Background ........................................................................................ 101 2. Naga City (innovative case) ................................................................ 107 a. City Profile and Innovations .......................................................... 107 b. Society and Leadership ................................................................. 110 c. Transaction Costs .......................................................................... 114 3. Dagupan City (typical case) ................................................................ 125 a. City Profile and Innovations .......................................................... 125 b. Society and Leadership ................................................................. 127 c. Transaction Costs .......................................................................... 132 4. Marikina City (innovative case) .......................................................... 141 a. City Profile and Innovations .......................................................... 141 b. Society and Leadership ................................................................. 144 c. Transaction Costs .......................................................................... 147 5. Malabon City (typical case) ................................................................ 159 a. City Profile and Innovations .......................................................... 159 b. Society and Leadership ................................................................. 161 c. Transaction Costs .......................................................................... 165 Chapter 5: Indonesian Cases ............................................................................. 175 1. Background ........................................................................................ 175 2. Balikpapan City (innovative case) ...................................................... 181 a. City Profile and Innovations .......................................................... 181 b. Society and Leadership ................................................................. 184 c. Transaction Costs .......................................................................... 188 3. Samarinda City (typical case) ............................................................. 198 a. City Profile and Innovations .......................................................... 198 b. Society and Leadership ................................................................. 200 c. Transaction Costs .......................................................................... 204 4. Pekalongan City (innovative case)
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