Indonesian Economic Development and Japanese Technology

Abstract
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.
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1 Introduction

`We should buy or even steal the technology ... If we keep waiting for Japan to be
willing to transfer its technology to us, we’ll be disappointed.’ This provocative statement
was made in...