Foreign Direct Investment, Skilled Labour, and Technical Efficiency: Perspective from Indonesia?s Foods and Beverages Exports

In this study, we examined the roles of foreign direct investment (FDI), skilled labour, and technical efficiency in determining the exports of the food and beverage industries in Indonesia. To address this issue, we utilised data from industry micro firms for the period 2010-2015. We applied the maximum likelihood estimation (MLE) technique to the logistic model and the stochastic frontier analysis (SFA). Findings revealed that the food and beverage industries are operating below the possible technical efficiency (TE). However, foreign direct investment, skilled labour, technical efficiency, and industrial concentration assert a significant positive effect on the probability of firms? exports. In the food and beverages sector and the beverages industry, firm size promotes exports; however, in the food industry, firm size has the opposite effect, reducing exports. The imported raw materials have an insignificant effect on the firms? probability of exporting. Interestingly, findings on the mediating roles of technical efficiency and industrial concentration, as well as technical efficiency and firm size, revealed an increasing influence on the probability of exporting. Skilled labour and firm size only positively promote exports in the foods and beverages sector and the food industry, but not in the beverages industry. These findings are novel and present an important pathway for policy-making related to the food and beverage industry, potentially shaping future strategies and initiatives in the Indonesian food and beverage sector.