DOES THE PRESENCE OF THE FOREIGN FIRMS IMPROVE

Jun 21st, 2015
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FDI inflows was expected to bring much needed capital, new machines, new technologies and sciences, marketing techniques and management skills which increase the productivity and competitiveness of the domestic industry.

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DOES THE PRESENCE OF THE FOREIGN FIRMS IMPROVE TECHNOLOGICAL CAPABILITIES OF THE LOCAL FIRMS?: CASE STUDY OF THE INDONESIAN AUTOMOTIVE SECTORABDUSY SYAKUR AMINFaculty of Economics and Administration, University of Malaya, MalaysiaFaculty of Engineering, University of Pasundan, IndonesiaTINNEKE HERMINAFaculty of Economics, University of Garut, IndonesiaABSTRACTFDI inflows was expected to bring much needed capital, new machines, new technologies and sciences, marketing techniques and management skills which increase the productivity and competitiveness of the domestic industry. This paper seeks to examine how Indonesian local automotive firms technological capabilities have evolved vis--vis foreign firms following increased liberalization from the late 1990s. The evidence amassed shows that there were no obvious statistical differences in human resource and process technology capabilities between foreign and local firms in 2006. Although foreign firms enjoyed superior product technologies with access to their subsidiaries, local firms have invested more in R&D technology to compete with them. Foreign firms enjoyed higher export intensities and export experience than local firms, which seems to be a consequence of regional production networks established by foreign multinational assemblers in Southeast Asia. The results confirm that the liberalization experience has driven rather than discouraged stronger initiatives in local firms to raise technological c

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