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FDI and the Dynamics of Productivity in Indonesian Manufacturing

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  • Yumiko Okamoto
  • Fredrik Sjoholm

Abstract

This article examines productivity growth in the Indonesian manufacturing sector. We use a longitudinal data set to calculate the effects on aggregate manufacturing productivity growth from improvements within establishments, from reallocation of market shares, and from the turnover of plants. Productivity growth is mainly explained by reallocation of market shares and from turnover of plants. Moreover, the foreign contribution to productivity growth is unclear and depends on the choice of productivity measure. A cautious conclusion is that the foreign contribution is about the same size as the foreign share of manufacturing output. Finally, there is a difference in the causes of productivity growth between foreign and domestic plants.

Suggested Citation

  • Yumiko Okamoto & Fredrik Sjoholm, 2005. "FDI and the Dynamics of Productivity in Indonesian Manufacturing," Journal of Development Studies, Taylor & Francis Journals, vol. 41(1), pages 160-182.
    • Handle: RePEc:taf:jdevst:v:41:y:2005:i:1:p:160-182
    DOI: 10.1080/0022038042000276608
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    References listed on IDEAS

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    Cited by:

    1. Razzaq, Asif & An, Hui & Delpachitra, Sarath, 2021. "Does technology gap increase FDI spillovers on productivity growth? Evidence from Chinese outward FDI in Belt and Road host countries," Technological Forecasting and Social Change, Elsevier, vol. 172(C).
    2. Lundin, Nannan & Sjöholm, Fredrik & Ping, He & Qian, Jinchang, 2007. "Technology Development and Job Creation in China," Working Paper Series 697, Research Institute of Industrial Economics.
    3. William Sheng Liu & Frank Wogbe Agbola & Janet Ama Dzator, 2016. "The impact of FDI spillover effects on total factor productivity in the Chinese electronic industry: a panel data analysis," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 21(2), pages 217-234, April.
    4. Sjöholm, Fredrik, 2016. "Foreign Direct Investment and Value Added in Indonesia," Working Paper Series 1141, Research Institute of Industrial Economics.
    5. Anwar, Sajid & Sun, Sizhong, 2014. "Heterogeneity and curvilinearity of FDI-related productivity spillovers in China's manufacturing sector," Economic Modelling, Elsevier, vol. 41(C), pages 23-32.
    6. Asaduzzaman, Md, 2019. "FDI as an Opportunity for Economic growth of Bangladesh: A VECM Analysis," MPRA Paper 110328, University Library of Munich, Germany, revised 05 Dec 2019.
    7. Preeti Flora & Gaurav Agrawal, 2015. "A Co-integration and Causality Analysis of Highest FDI Recipient Asian Economies," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 6(4), pages 1078-1089, December.
    8. Ian Goldin & Kenneth Reinert, 2005. "Global capital flows and development: A Survey," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 14(4), pages 453-481.
    9. Chiu, Chung-Yueh & Lin, Chang-Ching & Yang, Chih-Hai, 2019. "Technological catching-up between two ASEAN members and China: A metafrontier approach," China Economic Review, Elsevier, vol. 54(C), pages 12-25.
    10. Shinta R. I. Soekro & Triono Widodo, 2015. "Mapping And Determinants Of Intra-Asean Foreign Direct Investment (FDI): Indonesia Case Study," Working Papers WP/12/2015, Bank Indonesia.
    11. Chih‐Hai Yang & Chao‐Jing Yang & Chung‐Yueh Chiu & Hsuan‐Yu Lin, 2018. "Resource Allocation, Structural Change, and the Dynamics of Manufacturing Productivity in Indonesia," The Developing Economies, Institute of Developing Economies, vol. 56(4), pages 297-327, December.

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