PUBLICATIONS & REPORTS

Contents Introduction

This paper examines possible contributions of Japanese technology to economic growth in Indonesia. It contains a historical survey and statistical profile of direct Japanese investment in Indonesia as well as a discussion of the transfers of Japanese technology in Indonesia, both in general and specifically within individual Japanese subsidiaries. It argues that there is considerable potential for technology transfers due to the very size and diversity of Japanese investment in Indonesia. Effective technology transfer has indeed taken place in Japanese-controlled enterprises but the important question is, first, what kinds of technology transfer have been realized, and secondly, whether the transferred technologies have contributed to enhancing local technological capabilities among Indonesian employees. The study aims at contributing important insights into an on-going discussion on the effectiveness of Japanese technology transfers. It presents empirical evidence that operational capabilities can generally be successfully transferred whereas the transfer of adaptive and acquisitive capabilities, let alone innovation, takes place less frequently. In this respect the paper attempts to provide answers why the transfer of those latter technological capabilities has been less successful. The paper concludes with emphasizing the need for a stronger local technological effort in order to enhance Indonesian absorption capacity of Japanese technology and what measures can be taken to enhance Indonesia’s absorptive capacity for mastering foreign technologies. The report also contains a separate supplement exploring the socio-cultural aspects of the application of Japanese technology in Indonesian enterprises.