Ownership and Technological Capabilities in Indonesia’s Automotive Parts Firms

Abstract

This paper seeks to examine how local automotive parts firms’ technological capabilities have evolved vis-à-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. The results confirm that the liberalization experience has driven rather than discouraged stronger initiatives in local firms to raise technological capabilities, though, foreign firms still enjoy higher export-intensities.

Keywords: Technological capabilities, ownership, export, automotives, Indonesia

JEL Classification: F23, L62, O31, O53