Technical Inefficiency in Nine Clusters of Indonesian Manufacturing Firms And its Determinants: Stochastic Frontier Analysis

Astanto, Theresya Jeini and Suyanto, Suyanto and Santoso, Henrycus Winarto and Salim, Ruhul (2022) Technical Inefficiency in Nine Clusters of Indonesian Manufacturing Firms And its Determinants: Stochastic Frontier Analysis. Jurnal Ekonomi Pembangunan: Kajian Masalah Ekonomi dan Pembangunan, 23 (2). pp. 241-253. ISSN (Print): 1411-6081; ISSN (Online): 2460-9331

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Abstract

The current study examines the technical inefficiency of Indonesian manufacturing firms and its key determinants. Extending the previous research that mainly focuses on firms in a specific industry, the current study groups firms into nine industrial clusters and estimates them separately to find a variety of results among the clusters. The stochastic frontier analysis (SFA) method is applied to estimate the inefficiency score and the key determinants of 5,848 firms for five years (29,240 total observations). Data period ended in 2014 due to the substantial change in the classification code of the manufacturing industry in the survey by the Indonesian Central Board of Statistics. Five notable findings are recorded. First, the average efficiency score of all observed firms is 0.8815. Second, firm size is found to have a negative effect on inefficiency in the sample of all firms and three out of nine clusters (ISIC 34, ISIC 35, and ISIC 37). Third, foreign ownership generates a negative contribution to firms’ technical inefficiency in both the sample of all firms and the sample of each nine industrial clusters. Fourth, export orientation has various effects on firms across nine industrial clusters, with a dominant significant negative impact in paper and paper product industry (ISIC 34) and metal product industry (ISIC 38). Finally, import intensity provides a significant negative impact on firms in most industrial clusters. These findings support the argument on the importance of absorption capacity and unique firm characteristics in analyzing the impact of key determinants of technical inefficiency.

Item Type:	Article
Uncontrolled Keywords:	Technical Efficiency; Firm Size; Foreign Ownership; Export Orientation; Import Intensity
Subjects:	H Social Sciences > HB Economic Theory H Social Sciences > HC Economic History and Conditions
Divisions:	Faculty of Business and Economic > Department of Economic
Depositing User:	Suyanto 3198
Date Deposited:	03 Jan 2023 03:34
Last Modified:	19 Jan 2024 03:56
URI:	http://repository.ubaya.ac.id/id/eprint/43045

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