International trade and knowledge spillovers : the case of Indonesian manufacturing

The successful industrialisation and catch-up of countries in the East Asian region gave rise to an important debate concerning the role played by technological learning and knowledge creation. This paper seeks to examine this issue for Indonesia, a second tier Newly Industrialising Country (NIC). It focuses on the relative importance of learning from imported inputs vis-à-vis other factors influencing productivity in manufacturing. The concept of learning is operationalised drawing on the literature on technology spillovers on the one hand, and the literature on catch-up à la Abramovitz, on the other. Our results indicate that knowledge spillovers have become significant contributors to labour productivity growth after the liberalisation of the Indonesian economy.