TY - JOUR
T1 - The Effects of Market Concentration, Trade, and FDI on Total Factor Productivity
T2 - Evidence from Indonesian Manufacturing Sector
AU - Sugiharti, Lilik
AU - Purwono, Rudi
AU - Esquivias, Miguel Angel
AU - Teguh Sambodo, Leonardo A.A.
AU - Harianto, Samuel Kharis
N1 - Publisher Copyright:
© 2023 Penerbit Universiti Kebangsaan Malaysia. All rights reserved.
PY - 2023
Y1 - 2023
N2 - This study empirically examines the effects of exports, imports, market concentration, and foreign direct investment (FDI) on total factor productivity (TFP). We use a sample of 18, 002 Indonesian manufacturing firms, categorized according to technology intensity of low, medium, and medium-high over 2010-2014. TFP and its sub-components, e.g., technical efficiency, technological progress, and scale effect, are estimated using a Malmquist Productivity Index (MPI). The estimation results indicate that market concentration, trade, and FDI positively impact technical efficiency and production scale, but reduce technological progress, which inhibits sectoral development. FDI inflows in Indonesia increase technical efficiency but negligibly enhance technological competencies and the scale of operation in recipient sectors. Increasing firm size is crucial in achieving greater productivity. An increase in market concentration has a negative effect on TFP. This negative impact increases as the share of exports, imports, and FDI in the sector intensifies. Investment and export promotion policies should be tailored based on the technology intensity (low, medium, and medium-high) as the effects of FDI and export participation differ across industries.
AB - This study empirically examines the effects of exports, imports, market concentration, and foreign direct investment (FDI) on total factor productivity (TFP). We use a sample of 18, 002 Indonesian manufacturing firms, categorized according to technology intensity of low, medium, and medium-high over 2010-2014. TFP and its sub-components, e.g., technical efficiency, technological progress, and scale effect, are estimated using a Malmquist Productivity Index (MPI). The estimation results indicate that market concentration, trade, and FDI positively impact technical efficiency and production scale, but reduce technological progress, which inhibits sectoral development. FDI inflows in Indonesia increase technical efficiency but negligibly enhance technological competencies and the scale of operation in recipient sectors. Increasing firm size is crucial in achieving greater productivity. An increase in market concentration has a negative effect on TFP. This negative impact increases as the share of exports, imports, and FDI in the sector intensifies. Investment and export promotion policies should be tailored based on the technology intensity (low, medium, and medium-high) as the effects of FDI and export participation differ across industries.
KW - Total factor productivity
KW - decent work
KW - energy efficiency
KW - foreign direct investment
KW - market concentration
UR - http://www.scopus.com/inward/record.url?scp=85164610855&partnerID=8YFLogxK
U2 - 10.17576/JEM-2023-5701-05
DO - 10.17576/JEM-2023-5701-05
M3 - Article
AN - SCOPUS:85164610855
SN - 0127-1962
VL - 57
JO - Jurnal Ekonomi Malaysia
JF - Jurnal Ekonomi Malaysia
IS - 1
ER -