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Multinational presence and labour productivity differentials in Indonesian manufacturing, 1975-2001

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  • Sadayuki Takii
  • Eric Ramstetter

Abstract

Foreign multinational corporations (MNCs) have accounted for important shares of employment and production in Indonesian manufacturing since 1975, and these shares increased especially rapidly in the early to mid-1990s. These increases were concentrated in the machinery industries and in MNCs with large foreign ownership shares, and continued through the crisis of 1997-98 and beyond, despite apparently large withdrawals of inward foreign direct investment in 1998 and subsequent years. MNCs generally had much higher average labour productivity than local plants and, after controlling for plant-level variation in electricity consumption per employee, size and vintage, we found that these differentials persisted in about three-quarters of the cases examined. However, there was also large variation in MNC presence and in MNC-local productivity differentials across industries and time, with statistically insignificant differentials most common in apparel and footwear, as well as in MNCs with small foreign-ownership shares.

Suggested Citation

  • Sadayuki Takii & Eric Ramstetter, 2005. "Multinational presence and labour productivity differentials in Indonesian manufacturing, 1975-2001," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 41(2), pages 221-242.
    • Handle: RePEc:taf:bindes:v:41:y:2005:i:2:p:221-242
    DOI: 10.1080/00074910500117040
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    References listed on IDEAS

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    1. Theodore H. Moran, 2001. "Parental Supervision: The New Paradigm for Foreign Direct Investment and Development," Peterson Institute Press: All Books, Peterson Institute for International Economics, number pa64, January.
    2. Haryo Aswicahyono, 2000. "How Not to Industrialise? Indonesia's Automotive Industry," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 36(1), pages 209-241.
    3. Menon, Jayant, 1998. "Total factor productivity growth in foreign and domestic firms in Malaysian manufacturing," Journal of Asian Economics, Elsevier, vol. 9(2), pages 251-280.
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    Cited by:

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    2. Kelly Bird & Hal Hill & Sandy Cuthbertson, 2008. "Making Trade Policy in a New Democracy after a Deep Crisis: Indonesia," The World Economy, Wiley Blackwell, vol. 31(7), pages 947-968, July.
    3. Yang, Chih-Hai & Chen, Ying-Hui, 2012. "R&D, productivity, and exports: Plant-level evidence from Indonesia," Economic Modelling, Elsevier, vol. 29(2), pages 208-216.
    4. Cassey Lee & Dionisius Narjoko, 2015. "Escaping the Middle-Income Trap in Southeast Asia: Micro Evidence on Innovation, Productivity, and Globalization," Asian Economic Policy Review, Japan Center for Economic Research, vol. 10(1), pages 124-147, January.
    5. Julien Hanoteau, 2023. "Do foreign MNEs alleviate multidimensional poverty in developing countries?," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 13(4), pages 719-749, December.
    6. Eric Ramstetter, 2009. "Firm- and Plant-level Analysis of Multinationals in Southeast Asia: the Perils of Pooling Industries and Balancing Panels," Global COE Hi-Stat Discussion Paper Series gd09-106, Institute of Economic Research, Hitotsubashi University.
    7. Ahmed Fayez Abdelgouad & Christian Pfeifer & John P Weche Gelübcke, 2015. "Ownership structure and firm performance in the Egyptian manufacturing sector," Economics Bulletin, AccessEcon, vol. 35(4), pages 2197-2212.
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    10. NAULY Dahlia & HARIANTO & HARTOYO Sri & NOVIANTI Tanti, 2022. "Foreign Ownership And Productivity Of Food Industries In Indonesia," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 17(1), pages 130-144, April.
    11. Kyoji Fukao, 2013. "Productivity and capital accumulation," Chapters, in: Hal Hill & Maria Socorro Gochoco-Bautista (ed.), Asia Rising, chapter 4, pages 104-136, Edward Elgar Publishing.
    12. Sjoholm, Fredrik & Lipsey, Robert E, 2006. "Foreign Firms and Indonesian Manufacturing Wages: An Analysis with Panel Data," Economic Development and Cultural Change, University of Chicago Press, vol. 55(1), pages 201-221, October.
    13. Sadayuki Takii, 2009. "Multinationals, Technology Upgrading, and Wages in Urban and Rural Indonesia," Review of Development Economics, Wiley Blackwell, vol. 13(1), pages 151-163, February.
    14. James, William E. & Ramstetter, Eric D., 2008. "Trade, foreign firms and economic policy in Indonesian and Thai manufacturing," Journal of Asian Economics, Elsevier, vol. 19(5-6), pages 413-424.
    15. Tulus Tambunnan, 2007. "Trade and Investment Liberalization Effects on SME Development: A Literature Review and a Case Study of Indonesia," Working Papers 4207, Asia-Pacific Research and Training Network on Trade (ARTNeT), an initiative of UNESCAP and IDRC, Canada..

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