Gender diversity, foreign direct investment spillovers, and productivity: Unraveling the role of female workers in Indonesia

Abstract

AbstractThis study investigates the impact of gender diversity on firm productivity following foreign direct investment (FDI) spillover. Using Indonesian firm‐level datasets from 2011 to 2015, we employ gender spillovers to assess women's distinct contributions to labor spillovers, often manifested through their impacts on productivity, knowledge sharing, and innovation. A fixed‐effects estimator using Driscoll and Kraay's standard errors was employed to deal with cross‐sectional dependence. We first examined the intra‐industry spillover effects of FDI, followed by spatial spillovers, to evaluate the influence of one province's productivity changes on neighboring provinces. Our findings reveal significant gender‐driven FDI spillovers in the spatial dimension but not within the sector. The consistent results across subsamples (impacts on domestic firms, Java‐non‐Java Island, feminization degree, and industrial technology intensity) align with theoretical studies that emphasize the influence of geographical proximity on FDI spillovers. No significant intra‐industry spillover effects were observed. Further exploration of informal channels, possibly mediating spillover effectiveness, is recommended to provide insights into the observed sectoral dynamics.