The Spillover Effects from Foreign Direct Investment (FDI) on Labor Productivity: Evidence from Indonesian Manufacturing Sector [Efek Spillover dari Foreign Direct Investment (FDI) terhadap Produktivitas Tenaga Kerja: Studi pada Sektor Manufaktur Indonesia]

Riesta Karentina
| Abstract views: 443 | views: 198


Despite growing concern regarding the productivity benefits of foreign direct investment (FDI), few studies have been conducted on the impact of FDI spillovers on domestic firms’ labor productivity in Indonesia. This study aims to do three things. First, it examines the effect of FDI spillovers on domestic firms’ productivity. Second, it investigates the short-term and long-term effects of FDI spillovers on domestic firms’ productivity. Third, it explores the impact of FDI spillovers on domestic firms’ productivity in different groups of industries based on their factor intensity. Micro-level panel data covering about 20,000 medium and large manufacturing establishments in each year over the period 2010 and 2014 was employed. This study suggests that, within the same industry, horizontal spillovers are associated with domestic firms’ productivity: this relationship is negative in the short-term but positive in the long-term. This study’s findings also demonstrate that, across industries, there are negative backward spillover effects on domestic firms’ productivity. In addition, this study points out that FDI spillovers affect domestic firms’ productivity effectively when they are capital-intensive. Therefore, the results imply the importance of maintaining a long-term perspective toward foreign-invested firms in Indonesia and the government needs to stimulate policies that can enhance domestic firms’ capacity to supply intermediate materials and capital to foreign firm in downstream market by truncating the technology gap between foreign and domestic firms.

Keywords: FDI spillovers, horizontal spillover, backward spillover, labor productivity


Meskipun perhatian terkait manfaat foreign direct investment (FDI) terhadap produktivitas semakin berkembang, masih sedikit penelitian yang menguji pengaruh FDI spillovers terhadap produktivitas tenaga kerja pada perusahaan domestik di Indonesia. Penelitian ini bertujuan untuk melakukan tiga hal. Pertama, menguji pengaruh FDI spillovers terhadap produktivitas perusahaan domestik. Kedua, menginvestigasi dampak jangka pendek dan jangka panjang dari FDI spillovers terhadap produktivitas perusahaan domestik. Ketiga, menelaah lebih dalam dampak dari FDI spillovers terhadap produktivitas perusahaan domestik pada kelompok industri yang berbeda berdasarkan intensitas faktor produksinya. Penelitian ini menggunakan mikro panel data yang mencakup kurang lebih 20.000 perusahaan industri manufaktur sedang dan besar tiap tahunnya pada tahun 2010-2014. Hasil estimasi menunjukkan bahwa, di industri yang sama, horizontal spillovers memiliki pengaruh negatif terhadap produktivitas perusahaan domestik di jangka pendek namun positif pada jangka panjang. Hasil estimasi juga menunjukkan bahwa di industri yang berbeda, backward spillovers berdampak negatif terhadap produktivitas perusahaan domestik. Selain itu, FDI Spillovers memengaruhi produktivitas perusahaan domestik dengan lebih efektif ketika industri tersebut capital-intensive. Dengan demikian, hasil penelitian menunjukkan pentingnya mempertahankan perspektif jangka panjang terhadap perusahaan investasi asing di Indonesia, dan pemerintah perlu untuk menstimulasi kebijakan yang dapat meningkatkan kapasitas perusahaan domestik dalam memasok barang setengah jadi dan barang modal ke perusahaan asing di pasar hilir dengan cara memotong kesenjangan teknologi antara perusahaan asing dan domestik.

Kata kunci: FDI spillovers, horizontal spillover, backward spillover, produktivitas tenaga kerja


FDI spillovers; horizontal spillover; backward spillover; labor productivity; produktivitas tenaga kerja

Full Text:




Hill, H., Haryo, A., & Narjoko, D. (2010). Indonesian industrialization: Jobless growth?. Employment, living standard and poverty in contemporary Indonesia. Singapore: Institute of Southeast Asian Studies.

Krugman, P., Obstfeld, M., & Melitz, M. (2011). International economics: Theory and policy. Boston: Prentice Hall.

OECD. (2009). OECD benchmark definition of foreign direct investment 2008. France: Organization for Economic Co-operation and Development Publishing.

Journal and Working Paper:

Aitken, B.J. & Harrison, A.E. (1999). Do domestic firms benefit from direct foreign investment? Evidence from Venezuela. American Economic Review, 89, 605-618.

Blalock, G. & Gertler, P. (2008). Welfare gains from foreign direct investment through technology transfer to local suppliers. Journal of International Economics, 74, 402-421.

Bloch, H., Suyanto, S., & Salim, R. (2009). Does foreign direct investment lead to productivity spillovers? Firm level evidence from Indonesia. World Development Journal, 37, 1,861-1,876.

Bloch, H., Suyanto, S., & Salim, R. (2014). Which firms benefit from foreign direct investment? Empirical evidence from Indonesian manufacturing. Journal of Asian Economics, 33, 16-29.

Blomstorm, M. & Sjoholm, F. (1999). Technology transfer and spillovers: Does local participation with multinationals matter?. European Economic Review, 43(4-6), 915-923.

Caves, R. (1974). Multinational firms, competition and productivity in host country markets. Economica, 41, 176-193.

Djankov, S. & Hoekman, B. (2000). Foreign investment and productivity growth in Czech enterprises. World Bank Economic Review, 14, 49-64.

Eeckhout, J. & Jovanovic, B. (2002). Knowledge spillovers and inequality. American Economic Review, 92, 1290-1307.

Fujimori, A. & Sato, T. (2015). Productivity and technology diffussion in India: The spillover effects from foreign direct investment. Journal of Policy Modelling, 37, 630-651.

Haddad, M. & Harrison, A. (1993). Are there positive spillovers from direct foreign investment? Evidence from panel data from Morocco. Journal of Development Economics, 2, 51-74.

Hill, H., Haryo, A., & Narjoko, D. (2009). Determinants of foreign ownership in LDC manufacturing: An Indonesian case study. Journal of International Business Studies, 26, 139-158.

Javorcik, B. (2004). Does foreign direct investment increase the productivity of domestic firms? In search of spillovers through backward linkages. American Economic Review, 94, 605-627.

Kokko, A. (1994). Technology, market characteristics, and spillovers. Journal of Development Economics, 43, 279-293.

Kokko A. & Blomström M. (1997). How foreign investment affects host countries. Policy Research Working Paper, World Bank.

Le, H. & Pomfret R. (2011). Technology spillovers from foreign direct investment in Vietnam: horizontal or vertical spillovers?. Journal Asia Pacific Economics, 16, 183-201.

Lipsey, R.E. & Sjöholm, F. (2005). Host country impacts of inward FDI: Why such different answers?. EIJS Working Paper Series No. 192, The European Institute of Japanese Studies.

Liu, X., Parker, D., Vaidya, K., & Wei, Y. (2001). The impact of foreign direct investment on labor productivity in the Chinese electronics industry. International Business Review, 10, 421-439.

Liu, X., Siler, P., & Wang C., Wei, Y. (2001). Productivity spillovers from foreign direct investment: Evidence from UK Industry level panel data. Journal of International Business Studies, 31(3), 407-425.

Liu, Z. (2008). Foreign direct investment and technology spillovers: Theory and evidence. Journal of Development Economics, 85, pp. 176-193.

Lucas, R. (1988). On the mechanics of economic development. Journal of Monetary Economics, 22, 3-42.

Mastromarco, C. & Ghosh, S. (2009). Foreign capital, human capital, and efficiency: A stochastic frontier analysis for developing countries. World Development Review, 37, 489-502.

Narjoko, D.A. & Hill, H. (2007). Winners and losers during a deep economic crisis: Firm-level evidence from Indonesian manufacturing. Asian Economics Journal, 21, 343-368.

Negara, S. & Adam, L. (2012). Foreign direct investment and firms’ productivity level. ASEAN Economic Bulletin, 29(2), 116-127.

Ramstetter, E.D. (1999). Trade propensities and foreign ownership shares in Indonesian manufacturing. Indonesia Economic Studies, 35, 43-66.

Rhee, J. & Belot, T. (1989). Export catalysts in low-income countries. World Bank Working Paper. World Bank.

Rodriguez, R. (2000). Labor or total factor productivity: Do we need to choose?. Economic Studies and Policy Analysis Division. Canada: Department of Finance.

Romer, P. (1990). Endogenous technological change. Journal of Political Economy, 98, s71–s102.

Sjöholm, F. (1999a). Productivity growth in Indonesia: the role of regional characteristics and direct foreign investment. Economic Development and Cultural Change, 47(3), 559-584.

Sjöholm, F. (1999b). Technology gap, competition and spillovers from direct foreign investment: Evidence from establishment data. Journal of Development Studies, 36(1), 53-73.

Takii, S. (2001). Productivity spillovers and characteristics of foreign multinational plants in Indonesian manufacturing 1990-95. ICSEAD Working Paper No. 2001-14, Kitakyushu, Japan.


Hymer, S.H. (1960). In the international operations of national firms: A study of direct foreign investment (p. 1976). PhD dissertation. MIT, MA: MIT Press.

Digital Sources:

Badan Koordinasi Penanaman Modal. (2018). Press release investment realization in 2017. Retrieved from

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.


  • There are currently no refbacks.