REGIONAL INNOVATION AND HUMAN DEVELOPMENT: THE MODERATING ROLE OF FISCAL CAPACITY IN INDONESIA

Abstract

This study aims to analyze the effect of regional innovation on human development at the district/city level in West Java Province, with fiscal capacity as a moderating variable. Employing an explanatory quantitative approach, the study uses panel data from 2019 to 2023 across 27 local governments to test hypotheses through multiple linear regression analysis in SPSS. The findings indicate that regional innovation has a positive and statistically significant impact on the Human Development Index (HDI). Moreover, fiscal capacity significantly moderates the relationship between regional innovation and HDI, indicating that the effect of innovation on human development is more potent in regions with higher budgetary capacity. The significant influence of control variables further supports these results—Gross Regional Domestic Product (GRDP) per capita (positive) and poverty rate (negative)—on HDI. The practical implication of this study highlights the importance of synergy between policy innovation and fiscal strength in formulating human development strategies within the framework of regional autonomy. The study also contributes theoretically to the discourse on innovation governance and regional development, while offering a relatively novel fiscal moderation approach within the context of public policy studies in Indonesia.