February 13, 2019 - A team of local PEP researchers held a national policy conference in Jakarta, Indonesia, to discuss the implications their findings on how improving cognitive skills can increase productivity and growth.
Around 25 stakeholders, including representatives of the Ministries of Health, Economic Affairs, National Development Planning, attended the event that highlighted the importance of “adaptability” for entrepreneurs with small and medium enterprises (SMEs).
In presenting the findings from their PEP study on the Cognitive Skills, Entrepreneurship, and Economic Growth in Indonesia, selected under the PAGE II initiative in 2017, the research team shed light on how investments to improve long-term health outcomes may be more valuable than training programs in boosting the cognitive skills needed for non-farm entrepreneurial success.
The research team found that a higher level of fluid intelligence (capacity to think logically and solve problems in novel situations) is associated with higher business profits and value. Crystallized intelligence (using learned skills and knowledge), on the other hand, was only found to have a positive effect on business performance when the entrepreneur is engaged in the sector most appropriate for his or her skills.
During the presentation, team member Veto Tyas Indro (pictured) said: “Why is fluid intelligence more impactful than math? Because it helps the entrepreneurs adapt to dynamic changes in the business environment.” He explained that advanced mathematic knowledge was not found to have a big effect on micro-entrepreneurs because complex calculations were unnecessary for small business operations. However, in a developing country setting like Indonesia, where economic environments change rapidly and rules and regulations on businesses are still relatively incomplete, the ability to quickly adapt to change and to solve problems is very useful.
Mohammad Rudy Salahuddin added: “Most Indonesian businesses are run by subsistence entrepreneurs. The existing policies for entrepreneurs do not take this type of entrepreneurs into account.” Mr Rudy is the Deputy for Coordination of Creative Economy, Entrepreneurship, and Competitiveness of Cooperatives and Small and Medium Enterprises at the Coordinating Ministry for Economic Affairs of the Republic of Indonesia. He said that he would meet with the team after the event to discuss the policy implications of their findings.
Given that fluid intelligence is something that an individual is born with, rather than taught, it appears that training programs are not the most useful way to increase the cognitive abilities needed to support non-farm entrepreneurs in Indonesia, contrary to current policy.
The team called for policymakers to invest in improving long-term health outcomes, including in-utero care and environmental conditions. Find out more about the team’s research methods, findings, and policy recommendations in PEP Policy Brief 188.
Dr Hera Nurlita, from the Directorate of Community Nutrition at the Ministry of Health, stated that ensuring health-care and nutritious intake is part of her responsibility at the Ministry and agreed to discuss the matter further with the team.
The research team organized the event with support from PEP and in collaboration with the Center for Entrepreneurship Development & Studies, University of Indonesia and the SMERU Research Institute.