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Determinants of Foreign Ownership in LDC Manufacturing: An Indonesian Case Study

Author

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  • H H Aswicahyono

    (Australian National University)

  • Hal Hill

    (Australian National University)

Abstract

This paper examines the determinants of foreign investment shares in the manufacturing sector of Indonesia, a large, rapidly industrializing developing country with a comparatively rich industrial database. Particular emphasis is given to the interplay between ‘industrial organization’ and ‘policy’ factors in determining these shares. Most of the industrial organization factors were found to be significantly correlated with ownership shares, although the two variables capturing intangible assets were not. Two of the three policy variables were found to be significant. Since the policy regime in developing countries is typically more interventionist than that in OECD economies, this suggests that studies of the former ignore the policy context at their peril. It is also demonstrated that the results of these types of studies are sensitive to the precise definition of ‘foreign ownership’.© 1995 JIBS. Journal of International Business Studies (1995) 26, 139–158

Suggested Citation

  • H H Aswicahyono & Hal Hill, 1995. "Determinants of Foreign Ownership in LDC Manufacturing: An Indonesian Case Study," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 26(1), pages 139-158, March.
    • Handle: RePEc:pal:jintbs:v:26:y:1995:i:1:p:139-158
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    Citations

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    Cited by:

    1. Zhao, Hongxin & Zhu, Gangti, 1998. "Determinants of ownership preference of international joint ventures: new evidence from Chinese manufacturing industries," International Business Review, Elsevier, vol. 7(6), pages 569-589, November.
    2. Dionisius Narjoko & Titik Anas & Robertus Herdiyanto, 2018. "The Elusive Pursuit of Import Substitution in 21st Century Indonesia," Asian Economic Papers, MIT Press, vol. 17(1), pages 73-93, Winter/Sp.
    3. Nauval Hafiluddin & Arianto A. Patunru, 2022. "The Impact of Foreign Investment on Firm Performance: Indonesia After the 2007 FDI Reform," Economics and Finance in Indonesia, Faculty of Economics and Business, University of Indonesia, vol. 68, pages 37-50, Juni.
    4. khalifah, noor & Jaafar, Zakiah, 2017. "Technical Efficiency of Establishments in Malaysia’s Electrical and Electronics Industries: Exporting or Vertical Trade?," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 51(1), pages 157-130.
    5. Yasheng Huang, 1999. "The Institutional Foundation of Foreign-Invested Enterprises (FIEs) in China," William Davidson Institute Working Papers Series 264, William Davidson Institute at the University of Michigan.
    6. Wang, Chengqi & Hong, Junjie & Kafouros, Mario & Boateng, Agyenim, 2012. "What drives outward FDI of Chinese firms? Testing the explanatory power of three theoretical frameworks," International Business Review, Elsevier, vol. 21(3), pages 425-438.
    7. Min, Byung S. & Bowman, Robert G., 2015. "Corporate governance, regulation and foreign equity ownership: Lessons from Korea," Economic Modelling, Elsevier, vol. 47(C), pages 145-155.
    8. Dionisius Narjoko & Hal Hill, 2007. "Winners and Losers during a Deep Economic Crisis: Firm‐level Evidence from Indonesian Manufacturing," Asian Economic Journal, East Asian Economic Association, vol. 21(4), pages 343-368, December.
    9. Indro, Daniel C. & Richards, Malika, 2007. "The determinants of foreign partner's equity ownership in Southeast Asian joint ventures," International Business Review, Elsevier, vol. 16(2), pages 177-206, April.
    10. Dyah Wulan Sari & Noor Aini Khalifah & Suyanto Suyanto, 2016. "The spillover effects of foreign direct investment on the firms’ productivity performances," Journal of Productivity Analysis, Springer, vol. 46(2), pages 199-233, December.
    11. Shapiro, Daniel & Globerman, Steven, 2003. "Foreign investment policies and capital flows in Canada: a sectoral analysis," Journal of Business Research, Elsevier, vol. 56(10), pages 779-790, October.
    12. Estrin, Saul & Nielsen, Bo B. & Nielsen, Sabina, 2017. "Emerging Market Multinational Companies and Internationalization: The Role of Home Country Urbanization," Journal of International Management, Elsevier, vol. 23(3), pages 326-339.
    13. Muhamad Chatib Basri, 2017. "Reform in an imperfect world: the case of Indonesia," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 31(2), pages 3-18, November.
    14. Elsiddig Yousif Mohammed Mousa, 2019. "Analytical Study of Factors Affecting Investment in Saudi Arabia from the Period of 1990- 2017," International Journal of Applied Economics, Finance and Accounting, Online Academic Press, vol. 4(1), pages 10-14.
    15. Chengqi Wang & Jeremy Clegg & Mario Kafouros, 2009. "Country-of-Origin Effects of Foreign Direct Investment," Management International Review, Springer, vol. 49(2), pages 179-198, April.
    16. Estrin, Saul & Nielsen, Bo B. & Nielsen, Sabina, 2017. "Emerging market multinational companies and internationalization: the role of home country urbanization," LSE Research Online Documents on Economics 68350, London School of Economics and Political Science, LSE Library.
    17. Dionisius A. Narjoko & Raymond Atje, 2007. "The Effects of Agricultural Trade Liberalisation under the Doha Development Agenda with Special Reference to the Asia Pacific Region: A Brief Survey," Working Papers 3207, Asia-Pacific Research and Training Network on Trade (ARTNeT), an initiative of UNESCAP and IDRC, Canada..
    18. Milner, Chris & Reed, Geoff & Talerngsri, Pawin, 2004. "Foreign direct investment and vertical integration of production by Japanese multinationals in Thailand," Journal of Comparative Economics, Elsevier, vol. 32(4), pages 805-821, December.
    19. Canfei He, 2008. "Foreign Manufacturing Investment in China: The Role of Industrial Agglomeration and Industrial Linkages," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 16(1), pages 82-99, January.

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