Technological Capabilities of Automotive Firms in Indonesia and Malaysia

This paper examines differences in technological capabilities and the statistical relationships in a sample of automotive firms in Indonesia and Malaysia. The results show that firms in Indonesia, which has a liberalized trade regime, enjoyed higher human resource, process technology, and research and development (R&D) capabilities than firms in Malaysia, which has protected trading policies. Statistical relationships largely support theoretical arguments about R&D and the explanatory variable of foreign ownership in Indonesia where the relationship between the two is significant and negative. Foreign ownership was negatively correlated with human resource and positively correlated with process technology in Malaysia. The overall results show that there is a need to increase external competition and human capital supply for automotive firms in Malaysia to raise their technological capabilities.