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Reviving The Manufacturing Industry Through Servicification Strategy: Evidence From Indonesian Microdata

Author

Listed:
  • MHA Ridhwan

    (Bank Indonesia)

  • Nurul Pratiwi

    (Bank Indonesia)

  • Sulistiyo K. Ardiyono

    (Bank Indonesia)

  • Amelia A. Hidayat

    (Bank Indonesia)

Abstract

This study investigates the role of servicification within Indonesia’s manufacturing sector, focusing on its impact on productivity, global value chain (GVC) participation, and regional diversity in servicification practices. Empirical results indicate that servicification is positively correlated with firm productivity, with a 10% increase in service intensity linked to approximately a 1% productivity boost. The study further explores the differential impact of servicification across regions, technological classifications, and firm sizes. It reveals that in regions such as Java and Sumatra, high-value-added sectors benefit more from service integration, while the Eastern of Indonesia (EoI)’s reliance on primary manufacturing highlights challenges due to skill gaps and resource constraints. Also, based on regional survey data, they reveal how the integration of services—such as logistics, R&D, and customer support—into manufacturing operations can drive productivity and increase the sector’s competitiveness. This analysis provides policy recommendations to optimize servicification, enhance GVC participation, and support the transition to a service-oriented manufacturing landscape.

Suggested Citation

  • MHA Ridhwan & Nurul Pratiwi & Sulistiyo K. Ardiyono & Amelia A. Hidayat, 2024. "Reviving The Manufacturing Industry Through Servicification Strategy: Evidence From Indonesian Microdata," Working Papers WP/03/2024, Bank Indonesia.
    • Handle: RePEc:idn:wpaper:wp032024
    as

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    References listed on IDEAS

    as
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    2. Woori Lee, 2019. "Services liberalization and global value chain participation: New evidence for heterogeneous effects by income level and provisions," Review of International Economics, Wiley Blackwell, vol. 27(3), pages 888-915, August.
    3. Valerie Mercer-Blackman & Christine Ablaza, 2018. "The Servicification of Manufacturing in Asia: Redefining the Sources of Labor Productivity," Working Papers id:12954, eSocialSciences.
    4. Omar Bamieh & Matteo Fiorini & Bernard Hoekman & Adam Jakubik, 2020. "Services Input Intensity and US Manufacturing Employment Responses to the China Shock," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 57(2), pages 333-349, September.
    5. Taguchi, Hiroyuki, 2024. "Servicification in global value chains toward post-COVID-19 era in emerging and developing Asian economies," MPRA Paper 121004, University Library of Munich, Germany.
    6. Pattnayak, Sanja Samirana & Chadha, Alka, 2022. "Servicification and manufacturing exports: Evidence from India," Economic Modelling, Elsevier, vol. 108(C).
    7. Hiroyuki Taguchi & Ni Lar, 2024. "Servicification in Global Value Chains in Emerging and Developing Asian Economies," Economies, MDPI, vol. 12(6), pages 1-15, May.
    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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