TY - JOUR
T1 - Does competition and foreign investment spur industrial efficiency?
T2 - firm-level evidence from Indonesia
AU - Esquivias, Miguel Angel
AU - Harianto, Samuel Kharis
N1 - Funding Information:
This research was supported by Universitas Airlangga (Indonesia) under the Research Grant “Penelitian Hibah Mandat 2020” .
Publisher Copyright:
© 2020
PY - 2020/8
Y1 - 2020/8
N2 - This study examines the effects of market competition and foreign direct investment on the technical efficiency of firms within the Indonesian manufacturing sector using a Stochastic Frontier Analysis. We employ a firm-level panel dataset for the period of 2010–2014, covering 400 subsectors, and employing two measures of industrial concentration as proxies for market competition. The results suggest that firms operating in less competitive sectors in Indonesia experience higher technical efficiency. Additionally, foreign ownership, international activity (export-import), and firm size are positively related to technical efficiency. Such findings suggest that the efficient structure hypothesis (ESH) applies in Indonesia, as more efficient firms gain in market share as a result from dynamic competition. Foreign direct investment (FDI) via horizontal spillovers has contributed to an increase in intra industry firms’ efficiency. Nevertheless, as industrial concentration increases, the positive effects in firm efficiency from FDI and from international trade (imports and export) tend to decrease.
AB - This study examines the effects of market competition and foreign direct investment on the technical efficiency of firms within the Indonesian manufacturing sector using a Stochastic Frontier Analysis. We employ a firm-level panel dataset for the period of 2010–2014, covering 400 subsectors, and employing two measures of industrial concentration as proxies for market competition. The results suggest that firms operating in less competitive sectors in Indonesia experience higher technical efficiency. Additionally, foreign ownership, international activity (export-import), and firm size are positively related to technical efficiency. Such findings suggest that the efficient structure hypothesis (ESH) applies in Indonesia, as more efficient firms gain in market share as a result from dynamic competition. Foreign direct investment (FDI) via horizontal spillovers has contributed to an increase in intra industry firms’ efficiency. Nevertheless, as industrial concentration increases, the positive effects in firm efficiency from FDI and from international trade (imports and export) tend to decrease.
KW - Competition
KW - Econometrics
KW - Good health and well-being
KW - Indonesia
KW - Industrial concentration
KW - Industrialization
KW - Industry management
KW - International relations
KW - Manufacturing
KW - No poverty
KW - Reduced inequalities
KW - Stochastic frontier analysis
KW - Technical efficiency
KW - Technology adoption
UR - http://www.scopus.com/inward/record.url?scp=85089544539&partnerID=8YFLogxK
U2 - 10.1016/j.heliyon.2020.e04494
DO - 10.1016/j.heliyon.2020.e04494
M3 - Article
AN - SCOPUS:85089544539
SN - 2405-8440
VL - 6
JO - Heliyon
JF - Heliyon
IS - 8
M1 - e04494
ER -
