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Foreign direct investment spillovers and technical efficiency in the Indonesian pharmaceutical sector: firm level evidence

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Listed author(s):
  • Suyanto
  • Ruhul Salim

Abstract

The spillovers of Foreign Direct Investment (FDI) on domestic firms’ performances have been highly debated for many years. This article contributes to this debate by analysing spillovers effects on technical efficiency of Indonesian pharmaceutical sector using a unique unbalanced panel of highly disaggregated (at five-digit International Standard Industrial Classification (ISIC)) 210 firms over the period 1990--1995 (1001 observations). The Stochastic Production Frontier (SPF) and the Data Envelopment Analysis (DEA) based on Malmquist Productivity Indices (MPI) have been used to test the spillovers effects of FDI on technical efficiency. The empirical results from the SPF show that foreign firms are more efficient than domestic competitors, and the presence of the former increases the inefficiency of the latter. Similarly the results from the MPI demonstrate that FDI has a negative and significant impact on technical efficiency changes in domestic competitors, but generate positive spillovers to domestic suppliers.

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File URL: http://hdl.handle.net/10.1080/00036846.2011.605554
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Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 45 (2013)
Issue (Month): 3 (January)
Pages: 383-395

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Handle: RePEc:taf:applec:45:y:2013:i:3:p:383-395
DOI: 10.1080/00036846.2011.605554
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Cited by:

  1. KARGI, Bilal, 2014. "Portfolio in Turkish Economy, and A Long Termed Relation Between Foreign Direct Investments and The Growth, and The Structural Breakage Analysis (1980-2012)," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 70-81.
  2. Dyah Wulan Sari & Noor Aini Khalifah & Suyanto Suyanto, 2016. "The spillover effects of foreign direct investment on the firms’ productivity performances," Journal of Productivity Analysis, Springer, vol. 46(2), pages 199-233, December.
  3. Anwar, Sajid & Cooray, Arusha, 2015. "Financial flows and per capita income in developing countries," International Review of Economics & Finance, Elsevier, vol. 35(C), pages 304-314.
  4. Elisa Giuliani & Chiara Macchi, 2014. "Multinational corporations’ economic and human rights impacts on developing countries: a review and research agenda," Cambridge Journal of Economics, Oxford University Press, vol. 38(2), pages 479-517.
  5. Minjung Kim, 2015. "Productivity spillovers from FDI and the role of domestic firm’s absorptive capacity in South Korean manufacturing industries," Empirical Economics, Springer, vol. 48(2), pages 807-827, March.
  6. Turnbull, Christopher & Sun, Sizhong & Anwar, Sajid, 2016. "Trade liberalisation, inward FDI and productivity within Australia’s manufacturing sector," Economic Analysis and Policy, Elsevier, vol. 50(C), pages 41-51.

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