Empirical Evidence on The Relationship Between Technical Efficiency and Industrial Concentration in Medium Technology Intensive Industry in Indonesia
Emmy Kurnia Budianti, Professor Tetsushi Sonobe
2012 | Tesis | S2 Magister Ek.Pembangunan-
In industrial organization literatures, there have long been two opposing hypotheses on the relationship between technical efficiency and industrial concentration, the so-called quiet-life (QL) hypothesis (Hicks, 1935) and the efficient structure (ES) (Demsetz, 1973). This study inquires the relationship between technical efficiency and industrial concentration: (1) in the medium technology intensive industry sector as a whole; and (2) in medium-high-technology and medium-low-technology industries as separated groups. Firm-level data taken from the Annual Medium and Large Manufacturing Survey 2000–2009 compiled by BPS (Statistics Indonesia) in Java Island are used to estimate technical efficiency (TE) scores and calculate industrial concentration measurement (concentration ratio for four firms (CR4) and the Herfindahl–Hirshmann Index (HHI)). The results of the Granger-causality test performed in this study provides support for the efficient-structure (ES) hypothesis, indicating that higher industrial concentration is caused in Granger’s sense by higher technical efficiency in the medium-technology-intensive industry sector in Indonesia. Furthermore, the efficient-structure hypothesis holds in the medium-high technology intensive group. Thus, an increase in market concentration, if any, is unlikely to be harmful, but, on the contrary, increased concentration is likely to be a result of improved efficiency in this sector. As a consequence, government should strengthen the activities leading to an improvement in technical efficiency of medium-technology intensive-industry sector such as promoting research and development (R&D), industry–university cooperation, incentives for technology investment, and import tariff regulation.
Kata Kunci : Technical efficiency, industrial concentration, Data Envelopment Analysis (DEA), concentration ratio for four firms (CR4), Herfindahl–Hirshmann Index (HHI), Granger-causality, medium technology intensive industry.
