Dynamics of industrial concentration and technical inefficiency in the Indonesian food and beverage industry

Abstract

The food and beverage industry contributed significantly to the Indonesian economy, accounting for about 7% of gross domestic product yearly since 2000 (Indonesian Central Bureau of Statistics [BPS], 2016). Nevertheless, previous research has shown that the Indonesian food and beverage industry is highly concentrated and has the potential to create distortions in the Indonesian economy (see Setiawan & Effendi, 2016). Setiawan and Oude Lansink (2018) also found that the technical inefficiency in the industry was attributed, among other reasons, to high industrial concentration. 1 Previous research has investigated the relationship between industrial concentration and technical inefficiency in the Indonesian food and beverage industry using the frameworks of the quiet-life and efficient-structure hypotheses (see Setiawan & Oude Lansink, 2018;Setiawan et al., 2012). 2 The research found a unidirectional relationship: only industrial concentration affected technical inefficiency (quiet-life hypothesis). The quiet-life hypothesis suggests that firms operating in highly concentrated industries tend to be inefficient because of a lack of pressure from competitors. Past studies have used a comparative static approach, assuming that the

Measuring the Competition Index in the Indonesian Manufacturing Industry: The Structure–Conduct–Performance Paradigm

“…Moreover, the dimension of performance was measured using the price-cost margin and productivity following the research from the authors of [10,28,30,33,35]. The price-cost margin had a negative relationship with competition, while the productivity had a positive association with the competition, respectively.…”