Economic development or economic growth aims to improve social welfare. But the performance of economic growth is largely determined by pranata, or institutions, that govern the interaction of human capital, physical capital, and the application of technology (Acemoglu, 2008). Nobel laureate Douglass C. North (1990) states that institutions are rules of the game, or formally, humanly devised constraints that structure political, economic, and political interactions.
The roles of institutions have become a central issue in development. The difficulty of achieving harmonization through coordination efforts among state institutions, the private sector, and the community is an institutional issue that is increasingly being realized but in many cases an efficient solution has not been found. Challenges arise from differences in interests among stakeholders that creates high transaction cost. While the desired solution is how institutional roles and functions can be an incentive to support the achievement of better economic performance and resource distribution.
Understanding the importance of institutions in achieving development performance, the University of Indonesia established a Development Institution Research Center in 1986. This institution is expected to be able to solve various institutional problems in a broad sense that have an impact on achieving high development performance and equitable resource distribution.