Publisher

ISEIISEI

Journal One moment, please...One moment, please... Abstract

The impact of research and development (R&D) spending has been shown significantly in promoting countrys economic growth and productivity. Hence, we examine the research question by employing Indonesian manufacturing firm-level dataset in the years of 2017–2019 and by using Stochastic Frontier Analysis (SFA) to reveal whether heterogeneous firms R&D spending contributes to the efficiency performance of the company. The finding reveals the robust positive effect of R&D spending to the efficiency performance, which implies that firms allocating more R&D spending will perform better efficiency due to, for example, managerial expertise improvements. An interesting finding is shown by the interaction model for which larger R&D allocated by foreign firm will boost better efficiency than that allocated by domestic firms, supporting prior arguments that foreign firm can be the driver of innovation as they are more likely to be closer to the world technology frontier. Several policy implications are suggested such as in-house R&D program to encourage human capital development and tax incentive to avoid market rivalry with foreign firms.

Conclusion

The study demonstrates a robust positive effect of R&D spending on the efficiency performance of Indonesian manufacturing firms.Notably, R&D investments by foreign firms exhibit a stronger positive impact on efficiency compared to those made by domestic firms, supporting the notion that foreign firms act as drivers of innovation due to their closer proximity to global technological advancements.These findings suggest the implementation of policies promoting in-house R&D programs to foster human capital development and the provision of tax incentives to mitigate market rivalry with foreign entities.

Future Research

Further research should investigate the specific mechanisms through which foreign firms transfer technology and knowledge to domestic counterparts, potentially exploring the role of joint ventures or collaborative research projects. Additionally, studies could examine the impact of different types of R&D spending (e.g., basic research vs. applied research) on firm efficiency, considering the varying levels of risk and potential returns associated with each approach. Finally, future work should explore the moderating effects of firm size, industry characteristics, and regional factors on the relationship between R&D investment and efficiency, providing a more nuanced understanding of the conditions under which R&D is most effective in driving productivity gains within the Indonesian manufacturing sector. These investigations should encompass a broader range of firms and time periods to enhance the generalizability of the findings and inform more targeted policy interventions aimed at fostering innovation and economic growth.

References

1. R&D; Efforts, Total Factor Productivity, and the Energy Intensity in China: Emerging Markets Finance... tandfonline.com/doi/full/10.1080/1540496X.2019.1579709R D Efforts Total Factor Productivity and the Energy Intensity in China Emerging Markets Finance tandfonline doi full 10 1080 1540496X 2019 1579709
2. Technical Efficiency and Total Factor Productivity Growth of Indonesian Manufacturing Industry: Does... journals.sagepub.com/doi/10.1177/23210222211024438Technical Efficiency and Total Factor Productivity Growth of Indonesian Manufacturing Industry Does journals sagepub doi 10 1177 23210222211024438

Metadata

File size	741.29 KB
Pages	18
DMCA	Report