Impacts of inward FDI on Indonesian manufacturing sector

Wibowo, Wahyudi (2017) Impacts of inward FDI on Indonesian manufacturing sector. Devotio Journal of Business and Economic Studies, 10 (1). pp. 67-93. ISSN 2094-8794

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Developing economies have shown increasing reliance toward FDI-assisted development policies in the recent decades. However, evidences reveal no assurance on the effectiveness of those policies. This paper aims to study the impacts of inward FDI on output and productivity of the Indonesian manufacturing sector, by particularly inquiring the relative importance of two different types of FDI, i.e. market- and efficiency-seeking. Another inquiry is to understand on what extent different trade policy regimes might catalyst the impacts of FDI. This study used panel dataset of manufacturing firms during the period of 1990-2010 from the Annual Manufacturing Survey of Indonesian Central Agency on Statistics. The econometric specifications were drawn on the augmented Cobb-Douglas production function. For robustness check, it ran the estimations under the OLS, fixed-effect and random-effect models. The findings show that the positive impacts of inward FDI on the performance of Indonesian manufacturing sector during the period of study, either directly or indirectly, were not strong. The findings also suggest that successive trade liberalizations had induced for more positive impacts from FDI, but the period of crisis impeded the impacts. Moreover, dissimilar to the previous ones, this study finds that types of FDI per se do not responsible for the positive impacts.

Item Type: Article
Uncontrolled Keywords: FDI impacts, developing economy, market-seeking FDI, efficiency-seeking FDI, trade policy
Subjects: Business
Business > International Business Management
Business > Management
Divisions: Faculty of Business > International Business Management Undergraduate Study Program
Depositing User: Wahyudi Wibowo
Date Deposited: 23 Jan 2018 06:29
Last Modified: 23 Jan 2018 06:29

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