Industrial location policy, exporting activity, and firms’ collusive behavior: scrutinizing the unintended effect of industrial location policy in Indonesia

Ashintya Damayati (), Chaikal Nuryakin (), Muhammad Halley Yudhistira () and Teguh Dartanto ()
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Ashintya Damayati: Faculty of Economics and Business, Universitas Indonesia
Chaikal Nuryakin: Faculty of Economics and Business, Universitas Indonesia
Muhammad Halley Yudhistira: Faculty of Economics and Business, Universitas Indonesia
Teguh Dartanto: Faculty of Economics and Business, Universitas Indonesia

Economia e Politica Industriale: Journal of Industrial and Business Economics, 2024, vol. 51, issue 4, No 3, 815-858

Abstract: Abstract Industrial location policies are generally deemed advantageous for economic growth, yet they may inadvertently facilitate firms’ collusive behavior. Given the non-uniform nature of industrial location policies, their effects could varies due to heterogeneity in government involvement, incentives, regulation, and export orientation. To elucidate this, we examine firms’ natural tendency for collusion within Indonesia’s Special Economic Zones (SEZs) and Industrial Area (IAs) representing distinct cases for exploring this variability. Remarkably, our findings are intriguing: firms within IAs exhibit higher collusive behavior, while SEZ firms display lower tendencies compared to firms outside such areas. Notably, these findings are independent of differences in exporting activities, highlighting the role of government involvement, incentives, and regulation as key factors.

Keywords: Industrial location policy; Special economic zone; Industrial area; Non-competitive behavior; Collusion (search for similar items in EconPapers)
JEL-codes: L11 L52 O25 R11 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s40812-023-00294-w

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