Do institutions matter for regional development?

This paper discusses whether institutions matter for regional development and how to integrate them in regional development strategies. It is found that while institutions are crucial for economic development, generating an institution-based regional development strategy is likely to be undermined by the lack of definition of what are efficient institutions. Problems related to the measurement of institutions, to their space and time variability, to the difficulties in establishing the right mix of formal and informal institutions, and to the endogeneity between institutions and economic development make one-size-fits-all approaches to operationalizing institutions difficult. The paper posits that, in order to overcome these problems, it is crucial to distinguish between the 'institutional environment' and 'institutional arrangements', that is, to target not the institutions which shape the unique character of any territory, but the institutional factors that represent barriers for the efficacy of other factors influencing economic development (that is, education, training and skills, innovation, infrastructure and the like).