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All Journal Formosa Journal of Multidisciplinary Research (FJMR)
Farhan Habibie
Universitas Padjadjaran
Civil Engineering, Building, Construction & Architecture Computer Science & IT Decision Sciences, Operations Research & Management Education Social Sciences

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Analysis of Total Factor Productivity in Indonesia’s Large and Medium-Scale Industries in Response to Industry 4.0 Farhan Habibie; Rizalul Kalam
Formosa Journal of Multidisciplinary Research Vol. 4 No. 5 (2025): May 2025
Publisher : PT FORMOSA CENDEKIA GLOBAL

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.55927/fjmr.v4i5.173

Abstract

This study examines the impact of Industry 4.0 on Total Factor Productivity (TFP) in Indonesia's large and medium-scale industries from 2010 to 2015. Utilizing the Stochastic Frontier Analysis (SFA) method with a translog production function, the research analyzes the relationship between inputs (capital, labor, and raw materials) and industrial output, while decomposing TFP growth into efficiency changes (EC), technological changes (TC), and scale effects (SC). The findings reveal that labor and raw materials significantly influence output, with labor exhibiting the highest elasticity (0.6389). The average TFP growth rate was 3.689%, primarily driven by technological advancements (6.996%), despite a decline in technical efficiency (-3.358%). The motor vehicle and food industries demonstrated the highest technical efficiency, while sectors like wood and furniture lagged. The study highlights Indonesia's reliance on foreign technology and underscores the need for domestic innovation to enhance Industry 4.0 readiness. Policy recommendations include fostering R&D collaboration and improving infrastructure to sustain productivity growth.
Co-Authors Rizalul Kalam