The Effect of Foreign Direct Investment Spillover on The Level of Technical Efficiency in Large and Medium Manufacturing Industry in East Java
Downloads
Foreign Direct Investment (FDI) takes an important role in the development process, especially in developing countries. The purpose of this study is to examine and analyze FDI spillover on the level of technical efficiency in the large and medium manufacturing industry in East Java. This study uses a time-varying stochastic frontier approach for firm-level panel data of the East Java manufacturing industry. The results show that all factors in this study affect the level of technical efficiency of large and medium industries in East Java. Variable foreign share, FDI horizontal spillover, and firm size have a positive influence on the technical efficiency of the industry. Whereas the variable FDI backward spillover, FDI forward spillover and the level of market concentration negatively affect the level of technical efficiency of the industry. Finally, it's needed to build synergies and sustainable relationships between products produced by domestic and foreign firms. Thus, the presence of foreign firms in East Java could have a positive impact on improving the technical efficiency of the domestic industry both at the upstream and downstream levels.
Keywords: Foreign Direct Investment Spillover, Technical Efficiency, East Java Industry
JEL: F21, L60, D24
Aigner, Dennis, C.A. Knox Lovell, dan Peter Schmidt. (1977). Formulation and estimation of stochastic frontier production models. J Econom 6 : 21–37.
Aitken, Brian J. dan Ann E. Harrison. (1999). Do domestic firms benefit from direct foreign investment? Evidence from Venezuela. Am. Econ. Rev. 89 : 606–618.
Badan Koordinasi Penanaman Modal. (2019). Kumpulan Publikasi dan Statistik. Dikutip 15 Juni 2019 dari https://www.bkpm.go.id.
Badan Pusat Statistik. (2017-2018). Kumpulan Berita Resmi Statistik. Dikutip 17 Januari 2019 dari https://jatim.bps.go.id.
Baten, A., Kamil, A. A., & Haque, M.A. (2010). Productive Efficiency of Tea Industry : A stochastic frontier approach. African Journal of Biotechnology, 9 (25) : 3808-3816.
Battese, George E. dan Timothy J. Coelli. (1992). Frontier production functions, technical efficiency and panel data: with application to paddy farmers in India. J Prod Anal 3: 153–169.
Blalock, G., & Gertler, P. (2008). Welfare gains from Foreign Direct Investment through technology transfer to local suppliers. Journal of International Economics, 402-421.
Bwalya, Samuel Mulenga (2006). Foreign direct investment and technology spillovers: evidence from panel data analysis of manufacturing firms in Zambia. J. Dev. Econ. 81 : 514–526.
Cheng, Guoqiang. (2012). Opening up of China's agriculture: impact, implication and strategic choice (in Chinese). Chinese Rural Econ. 3 (4–13), 43.
Cheung, Kui Yin dan Ping Lin. (2004). Spillover effects of FDI on innovation in China: evidence from the provincial data. China Econ Rev 15 : 25–44.
Cobb, Charles W. dan Paul H. Douglas. (1928). A Theory of Production. American Economic Review 18 (Supplement) : 139–165.
Coase, R.H. (1937). The nature of the firm. Economica 4 : 386-405.
Coelli, Timothy J., D.S. Prasada Rao, Christopher J. O'Donnel, dan George E. Battese. (2005). An Introduction to Efficiency and Productivity Analysis (Second Edition). Queensland : Library of Congress Cataloging in Publication Data, University of Queensland.
Darmawan, Rizal Rahmat. (2016). Pengaruh Perdagangan Vertikal Terhadap Kinerja Industri Alat Angkut di Indonesia [skripsi]. Surabaya (ID) : Universitas Airlangga.
De Backer, K., & Sleuwaegen, L. (2003). Does Foreign Direct Investment Crowd Out Domestic Entrepreneurship? Review of Industrial Organization, 67–84.
Djankov, S., & Hoekman, B. (2000). Foreign investment and productivity growth in Czech enterprises. World Bank Econ. Rev, 14, 49–64.
Girma, S., Gong, Y., & Görg, H. (2009). What Determines Innovation Activity in Chinese State-owned Enterprises? The Role of Foreign Direct Investment. World Development, 866-873.
Görg, H., & Greenaway, D. (2004). Much Ado about Nothing? Do Domestic Firms Really Benefit from Foreign Direct Investment? World Bank Res. Obser, 19, 171-197.
Jan, K., Vopravil, C. R., & Office , C. S. (2007). KLE Production Function and Total Factor Productivity. Statistic.
Javorcik, Beata Smarzynska. (2004). Does foreign direct investment increase the productivity of domestic firms? In search of spillovers through backward linkages. Am Econ Rev 943 : 605–627.
Javorcik, Beata Smarzynska. (2008). Can survey evidence shed light on spillovers from foreign direct investment? World Bank Res Obs 23 : 140–159.
Jin, Shaosheng dan Suminori Tokunaga. (2007). Location of Japanese investment in China's food industry. China Rev. 7 : 129–138.
Keller, W. (2009). International Trade, Foreign Direct Investment, and Technology Spillovers, National Bureau of Economic Research. Working Paper.
Khalifah, Noor Aini dan Abdul Talib, B. (2008). Are foreign multinationals more efficient? A stochastic production frontier analysis of Malaysia's automobile industry. International Journal of Management Studies (IJMS), 15, 91-113.
Kohpaiboon, Archanun. (2009). Vertical and horizontal FDI technology spillovers: evidence from Thai manufacturing. ERIA Discussion Paper Serie: No. 2009-08. Jakarta : Economic Research Institute for ASEAN and East Asia (ERIA).
Konings, Jozef. (2001). The effects of foreign direct investment on domestic firms: evidence from firm-level panel data in emerging economies. Econ. Transit. 9 : 619–633.
Kosová, Renata. (2010). Do foreign firms crowd out domestic firms? evidence from the Czech Republic. Rev. Econ. Stat. 92 : 861–881.
Kumbhakar, Subal C. (1990). Porduction frontiers, panel data and timevarying technical inefficiency. J Econom 46 : 201–212.
Lin, Ping, Zhuomin Liu, dan Yifan Zhang. (2009). Do Chinese domestic firms benefit from FDI inflow? Evidence of horizontal and vertical spillovers. China Econ Rev 20 : 677–691.
Lv, L. dan Z. Huang. (2006). Empirical study on the effects of foreign direct investment on Chinese agricultural products processing industry (in Chinese). Chinese Rural Econ. 5 : 18–24.
Lv, L. dan Z. Huang. (2006). A research on the relations between FDI and trade in agriculture and food industry in China (in Chinese). J. Int. Trade 1 : 25–32.se
Markusen, James R. dan Anthony J. Venables. (1999). Foreign direct investment as a catalyst for industrial development. Eur Econ Rev 43 : 335–356.
Margono, Heru dan Subhash C. Sharma. (2006). Efficiency and productivity analyses of Indonesian Manufacturing industries. Journal of Asian Economics 17 : 979-995.
Meeusen, Wim dan Julien Van den Broeck. (1977). Efficiency estimation from Cobb-Douglas production functions with composed error. Int Econ Rev 8 : 435–444.
Moulton, B. (1990). An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Units. The Review of Economics and Statistics, 334-338 .
Neuman, W. Lawrence. (2003). Social Research Methods : Qualitative and Quantitative Approach. Boston : Allyn and Bacon.
Nguyen, C. D., Simpson, G., Saal, D., Nguyen, A.N., & Pham, N.Q. (2008). FDI horizontal and vertical effects on local firm technical efficiency. Development and Policies Research Center (Depocen), Hanoi, Vietnam.
Ni, H. (2011). Balance foreign and domestic markets and resources to assure industrial security of agriculture (in Chinese). Chinese Rural Econ. 5 : 57–60, 81.
Nicholson, Walter dan Christopher Snyder. (2012). Microeconomics Theory "Basic Principal and Extensions” Eleventh Edition. South-Western : Cengage Learning.
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOP. (2009). Policy Responses to the Economic Crisis: Investing in Innovation forLong-Term Growth . Retrieved from http://www.oecd.org/sti/42983414.pdf
Pavelescu, Florin. (2011). Some aspects of the translog production function estimation. Romanian Journal of Economics, vol. 32, issue 1(41) : 131-150.
Rodriguez-Clare, A. (1996). Multinationals, linkages, and economic development. The American Economic Review, 86, 852–873.
Saggi, Kamal. (2002). Trade, foreign direct investment, and international technology transfer: A survey. World Bank Res Obs 17 : 191–235.
Sari, Dyah Wulan, Noor Aini Khalifah, dan Suyanto. (2016). The spillover effects of foreign direct investment on the firms' productivity performances. J Prod Anal 46 : 199–233.
Sharma, Khem R. dan Leung, P.S. (1998). Technical efficiency of carp production in Nepal: An application of the stochastic frontier production function approach. Aquaculture Economics and Management 2 : 129-140.
Soetanto, Tessa Vanina. (2015). Super Slack Based Model Efficiency and Stock Performance of Manufacturing Industry Listed in Indonesian Stock Exchange. Procedia – Social and Behavioral Sciences 211 : 1231-1239.
Sujarweni, V. Wiratna. (2015). Metodologi Penelitian Bisnis & Ekonomi. Yogyakarta : Pustakabarupress.
Yin, C. (2010). The dual effect of agriculture multinational corporations and internationalization of agriculture (in Chinese). Issues Agric. Econ, 3, 4-10.
Copyright (c) 2020 Ahmad Oktabri Widyananda, Dyah Wulan Sari
This work is licensed under a Creative Commons Attribution 4.0 International License.
JDE (Journal of Developing Economies) (p-ISSN: 2541-1012; e-ISSN: 2528-2018) is licensed under a Creative Commons Attribution 4.0 International License
- The journal allows the author to hold the copyright of the article without restrictions.
- The journal allows the author(s) to retain publishing rights without restrictions
- The legal formal aspect of journal publication accessibility refers to Creative Commons Attribution (CC BY)
