Abstract
This paper analyzes the influence of foreign presence on the performance of food industry in Indonesia using panel data from 28 subsectors in the period of 2011-2015. The data used is the Annual Survey of Large and Medium Industries (IBS) from Statistics Indonesia. The performance indicator utilized is the price cost margin (PCM). The PCM model was estimated using regression and tested with the Hausman statistical test. The results show that foreign presence increases the performance of Indonesia's food industry. Other factors that affect the industry's performance are industry concentration, market growth and imports of raw materials. Foreign presence, concentration and market growth have a positive effect on performance, meanwhile import ratio has a negative effect. The government needs to continue to encourage foreign investment in the food industry since the presence of foreign presence will improve industrial performance. In addition, efforts are also needed to supply quality raw materials by encouraging the development of domestic upstream industries.
Highlights
The food industry is one of the industries that interests foreign investors to invest in Indonesia
This paper aims to analyze the impact of foreign presence on the price cost margin (PCM) of the Indonesian food industry
This study examines the influence of foreign presence on the performance of the food industry group by using annual Big and Medium Industry (IBS) survey data from the Statistics Indonesia
Summary
The food industry is one of the industries that interests foreign investors to invest in Indonesia. The presence of foreign firms is expected to have an impact on the performance of the food industry. The impact of the presence of foreign firms on the performance of the host country industry is still being debated in some literature. Khalilzadeh-Shirazi (1974) using data from the UK manufacturing industry revealed that foreign presence had no effect on industry performance as measured by price cost margin (PCM). Foreign presence in the form of foreign investment is the most important variable in determining PCM (Kalirajan, 1993). Foreign presence has a positive effect on PCM in the Philippines (Go et al, 1999), in Malaysia (Kalirajan, 1993) and US (Co, 2001)
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