Productivity spillovers and characteristics of foreign multinational plants in Indonesian manufacturing 1990–1995

Abstract

This paper examines productivity spillovers derived from the existence of foreign multinational plants and explores the conditions that influence the magnitude of spillovers. The empirical evidence first suggests the existence of positive spillovers. Second, the results suggest that the greater presence of majority- or wholly foreign plants reduced the magnitude of spillovers. Third, partially due to the stronger negative relationship in industries where technological gaps between foreign- and locally owned plants were relatively large, the magnitude of spillovers tended to be smaller and was sometimes negative in such industries. On the other hand, the negative relationship between the magnitude of spillovers and the presence of majority- or wholly foreign plants was not observed in locally owned plants with research and development activity.