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Does Foreign Direct Investment Lead to Productivity Spillovers? Firm Level Evidence from Indonesia

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  • Suyanto
  • Salim, Ruhul A.
  • Bloch, Harry

Abstract

Summary This paper examines whether spillovers from foreign direct investment (FDI) make any contribution to productivity growth in the Indonesian chemical and pharmaceutical firms using plant-level panel data. The spillover effects from FDI are analyzed using a stochastic frontier approach and productivity growth is decomposed using a generalized Malmquist output-oriented index. The results show positive productivity spillovers from FDI; higher competition is associated with larger spillovers; and domestic firms with R&D gain more spillover benefits compared to those without R&D. FDI spillovers are found to be positive and significant for technological progress and positive, but not significant, for technical and scale efficiency change.

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  • Suyanto & Salim, Ruhul A. & Bloch, Harry, 2009. "Does Foreign Direct Investment Lead to Productivity Spillovers? Firm Level Evidence from Indonesia," World Development, Elsevier, vol. 37(12), pages 1861-1876, December.
    • Handle: RePEc:eee:wdevel:v:37:y:2009:i:12:p:1861-1876
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