The effect of green policy implementation on green entrepreneurship: Evidence from Indonesia’s micro, small, and medium enterprises

Abstract

This study investigated the impact of implementing Ngawi Hijau, a regional spatial planning policy adopted by the Ngawi Regency government, on green entrepreneurship behavior of micro, small, and medium enterprise (MSME) actors engaged in the wood processing industry subsector in Ngawi Regency, Indonesia. Using 150 MSME actors as the research sample and the ordinary least squares estimation technique, this study found that green policy, which includes policy targets, MSME group abilities, MSME resources, incentives, and security, has a positive and significant impact on green entrepreneurship in Ngawi Regency. This study proves that clear and relevant public policy objectives are a prerequisite for effective policy implementation. Clear policy targets make the target group of the policy understand the policy implications, thereby lowering the resistance to the policy. Therefore, in contrast to the top-down model, which emphasizes the role of authority institutions, this research empowerment model proves that, as one of the parties most responsible for policy, aspects related to MSME actors have a pivotal role in realizing effective policy implementation. Among the five factors under consideration, the ability and resources of MSMEs and incentives have a relatively more significant contribution than the other factors in encouraging green entrepreneurial behavior in the wood industry business in Ngawi regency. Thus, to strengthen the readiness of the wood industry MSME actors in implementing the green policy, the Ngawi Regency government needs to pay more attention to the condition of MSME resources, which include HR, financial, and technical aspects. Incentives in terms of financial and non-financial assistance can be an instrument for strengthening MSME resources.