Do institutions matter for regional development ?

This paper discusses the question of whether institutions matter for regional development and, if so, of how can the institutional dimension be integrated in regional development strategies. It finds that while the role of local institutions is crucial for economic development and as a means of determining the returns of regional development policies, generating an institution-based general regional development strategy is likely to be undermined by the lack of definition of what are adequate, solid, and efficient institutions. Problems related to the measurement of institutions, to their space and time variability, to the difficulties for 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 within regional development possibly unfeasible. Development strategies that are specifically tailored to the conditions of different regional institutional environments across regions are, in contrast, likely to yield greater returns.