Abstract
The fact that the study of local economic governance has been widely studied, but until now there has been no research conducted in the context of institutional economics to determine the effect of institutional variables on business performance, especially in Yogyakarta Local economic governance is the policy of local government Which regulates business activities in the regions according to their respective authorities. The survey method was conducted to 150 respondents of business actors in Yogyakarta to assess their perception on the quality of economic governance in their area. The results of this study indicate that the quality of economic governance in Yogyakarta is still not good based on the perceptions of business actors so it needs to be revitalized the role and function of institutions in the management of the regional economy. Some of the institutional aspects of local economic management that need to be the focus of regional government attention are improving the quality of local economic management related to land access for employers, regional infrastructure, business licensing, interaction of local government and business actors, minimizing transaction costs, and provision of private business development programs . Through the realization of a reliable institution in the management of the regional economy will create effectiveness, efficiency, productivity, profitability and sustainability of the business world, especially in the real sector so as to increase regional economic growth in order to encourage the growth of national economic growth and can provide trickle down effect for increasing welfare will have a positive impact for Pendapatan Asli Daerah (PAD). The realization of good local economic governance is an absolute prerequisite to succeed decentralization and regional autonomy today and in the future.
Keywords: business permit, interaction of local government and business actor, transaction cost, business performance.