Foreign Presence and Industrial Concentration In Indonesian Food Industries
Abstract
Indonesia requires foreign investment to meet the capital needs of the food industries. On the other hand, foreign presence can cause high industrial concentration. This paper analyzes the effect of foreign presence on the concentration of the food industry in Indonesia using panel data from 28 subsectors in the period 2011-2015. The data used is the annual Large and Medium Industries Survey (IBS) data from Statistics Indonesia. The concentration indicators used are the concentration ratio (CR4) and the Herfindahl Hirschman Index (HHI). By using panel regression, the result shows that foreign presence has a positive influence on the concentration of the food industry in Indonesia. Besides, the economies of scale and market size also significantly influence the concentration of the food industry. The result indicates that the government investment policy must endorse more competition among firms.
JEL Classification Code: L66, L16
How to Cite:
Nauly, D., Harianto., Hartoyo, S., & Novianti, T. (2020). Foreign Presence and Industrial Concentration in Indonesian Food Industry. Signifikan: Jurnal Ilmu Ekonomi, Vol. 9(1), 69-80. doi: http://dx.doi.org/10.15408/sjie.v9i1.12200.
Keywords
References
Adam, R., & Khalifah, N. A. (2012). Foreign Presence and Market Concentration in Malaysian Manufacturing Industries. Jurnal Ekonomi Malaysia, 46(1), 119–132.
Aghion, P., Harris, C., Howitt, P., & Vickers, J. (2001). Competition, Imitation and Growth with Step-by-step Innovation. Review of Economic Studies, 68(3), 467–492.
Amess, K., & Roberts, B. M. (2005). The Impact of Foreign and State Ownership on Post-Transition Industrial Concentration: The Case of Polish Manufacturing. Economic Change and Restructuring, 38, 211–225.
Ayal, A. (2013). The Market for Bigness: Economic Power and Competition Agencies’ Duty to Curtail It. Journal of Antitrust Enforcement, 1(2), 221–246.
Bird, K. (1999). Concentration in Indonesian Manufacturing, 1975-1993. Bulletin of Indonesian Economic Studies, 35(35), 43–73.
Bischoff, O., & Buchwald, A. (2018). Horizontal and Vertical Firm Networks, Corporate Performance and Product Market Competition. Journal of Industry, Competition and Trade, 18(2), 25–45.
BKPM. (2017). Perkembangan_Realisasi_Investasi_PMA_Menurut_Sektor_Q2_2017. Retrieved from https://www.bkpm.go.id/id/statistik/investasi-langsung-luar-negeri-fdi
Blomström, M. (1986). Multinationals and Market Structure in Mexico. World Development, 14, 523–530. https://doi.org/10.1016/0305-750X(86)90067-7.
Bourlakis, C. A. (1987). Multinational Corporations and Domestic Market Structure: The Case of Greek Manufacturing Industries. Weltwirtschaftliches Archiv, 123, 719–733.
Cho, K. R. (1990). Foreign Banking Presence and Banking Market Concentration: The Case of Indonesia. The Journal of Development Studies, 27(1), 98–110. https://doi.org/ 10.1080/00220389008422185.
De Backer, K., & Sleuwaegen, L. (2003). Does Foreign Direct Investment Crowd Out Domestic Entrepreneurship? Review of Industrial Organization, 22(1), 67–84. https://doi.org/10.1023/A:1022180317898.
Driffield, N. (2001). Inward Investment and Host Country Market Structure: The Case of The U.K. Review of Industrial Organization, 18(4), 363–378.
Driffield, Nigel. (2001). Inward Investment, Industry Concentration and The Speed of Adjustment. Weltwirtschaftliches Archiv, 137(2), 193–214.
Dunning, J. H., & Lundan, S. M. (2008). Multinational Enterprises and the Global Economy, Second Edition. United Kingdom: Edward Elgar Publishing Limited.
Estrin, S., & Uvalic, M. (2014). FDI Into Transition Economies: Are the Balkans Different? Economics of Transition, 22(2), 281–312.
Fetai, B., & Morina, F. (2018). The Impact of Foreign Direct Investment on Press Freedom. Working Paper. Center for Economic Theories and Policies Sofia University St. Kliment Ohridski Faculty of Economics and Business Administration.
Forte, R., & Sarmento, P. (2014). Does FDI Increase Market Concentration? An Evaluation of the Portuguese Manufacturing Industries. Acta Oeconomica, 64(4), 463–480.
Gal, M. S., & Cheng, T. K. (2016). Aggregate Concentration: A Study of Competition Law Solutions. Journal of Antitrust Enforcement, 4(2), 282–322.
Ghemawat, P., & Kennedy, R. E. (1999). Competitive Shocks and Industrial Structure: The Case of Polish Manufacturing. International Journal of Industrial Organization, 17(6), 847–867. https://doi.org/10.1016/S0167-7187(97)00065-9.
Grullon, G., Larkin, Y., & Michaely, R. (2019). Are US Industries Becoming More Concentrated?. Review of Finance, 23(4), 697–743.
Hill, H. (1987). Concentration in Indonesian Manufacturing. Bulletin of Indonesian Economic Studies, 23(2), 71–100. https://doi.org/10.1080/00074918712331335201.
Kambhampati, U. S. (2000). Industry Competitiveness: Leadership Identity and Market Shares. Applied Economics Letters, 7(9), 569–573. https://doi.org/10.1080/ 13504850050059023.
Kejzar, K. Z. (2011). The Role of Foreign Direct Investment in the Host-Country Firm Selection Process: Firm-Level Evidence from Slovenian Manufacturing. Review of World Economics, 147(1), 169–193. https://doi.org/10.1007/s10290-010-0077-3.
Lall, S. (1979). Multinationals and Market Structure in an Open Developing Economy: The Case of Malaysia. Weltwirtschaftliches Archiv, 115, 325–350.
Liang, G. (2004). New Competition; Foreign Direct Investment and Industrial Development in China. Retrieved from http://repub.eur.nl/resource/pub_1795/
Lipczynski, J., John, W., & John, G. (2005). Industrial Organization, Competition, Strategy, Policy (Second). Harlow, England: Pearson Education Limited.
Okafor, G., & Webster, A. (2016). FDI in Transition Economies of Europe and the Former Soviet Union. In J. Holscher & H. Tomann (Eds.), Palgrave Dictionary of Emerging Markets and Transition Economics (pp. 413–434).
Ratnayake, R. (1999). Industry Concentration and Competition: New Zealand Experience. International Journal of Industrial Organization, 17, 1041–1057. https://doi.org/10.1016/ S0167-7187(97)00069-6.
Rutkowski, A. (2006). Inward FDI, Concentration, and Profitability in the CEECs: Were The Domestic Firms Crowded Out or Strengthened? Transnational Corporations, 15(3), 107–141.
Sarmento, P., & Forte, R. (2019). Does Foreign Presence Induce Host Country Firms’ Exit? The Case of Portugal. International Advances in Economic Research, 25(3), 323–337. https://doi.org/10.1007/s11294-019-09744-5.
Setiawan, M., Emvalomatis, G., & Lansink, A. O. (2012). Industrial Concentration and Price-Cost Margin of The Indonesian Food and Beverages Sector. Applied Economics, 44, 3805–3814. https://doi.org/10.1080/00036846.2011.581220.
Setiawan, M., & Oude Lansink, A. G. J. M. (2018). Dynamic Technical Inefficiency and Industrial Concentration in The Indonesian Food and Beverages Industry. British Food Journal, 120(1), 108–119. https://doi.org/10.1080/02692171.2019.1606900.
Singh, J. (2011). Inward Investment and Market Structure in an Open Developing Economy: a Case of India’s Manufacturing Sector. Journal of Economics and Behavioral Studies, 2(6), 286–297.
Willmore, L. (1989). Determinants of Industrial Structure: A Brazilian Case Study. World Development, 17(10), 1601–1617. https://doi.org/10.1016/0305-750X(89)90031-4.
DOI: 10.15408/sjie.v9i1.12200
Refbacks
- There are currently no refbacks.
