The Effect of Trade and Foreign Ownership on the Technical Efficiency of Indonesia’s Textile Industry

Title : The Effect of Trade and Foreign Ownership on the Technical Efficiency of Indonesia’s Textile Industry

Authors :
1. Rossanto Dwi Handoyo
2. Katarina Eriandika Dewayanti
3. Tamat Sarmidi
4. Kabiru Hannafi Ibrahim
5. Angga Erlando
6. Tri Haryanto

Department : Ilmu Ekonomi

Journal Name : Asian Economic and Financial Review

Kinds of Journal : Scopus Q1

Keywords : Apparel industry, Technical efficiency, Trade, Foreign ownership, Maximum likelihood estimation, Stochastic frontier analysis.

ABSTRACT

This study empirically examines the effect of trade (exports and imports) and foreign ownership on the technical efficiency of apparel industry in Indonesia from 2007 to 2013. Panel data and the maximum likelihood estimation approach to the stochastic frontier analysis (SFA) were applied for the analysis. While controlling for the spillover effect and firm size in the inefficiency model of the apparel industry, our empirical strategy indicates that the apparel industry has not yet reached the maximum level of technical efficiency. Export participation, foreign ownership, and spillover assert an increasing and significant influence on technical efficiency, while the import of raw materials asserts a negative and significant effect. Additionally, the mediation of exports and foreign ownership, and foreign ownership and firm size, increases the industry’s technical efficiency, while the mediation effect of firm size and imports, and firm size and spillover, reduce the industry’s technical efficiency. Recommendations based on the findings are outlined for policymakers.

For details : https://archive.aessweb.com/index.php/5002/article/view/4556