<![CDATA[This study examines the impact of Indonesia's 2017 tightening of Local Content Requirements (LCR) for fourth-generation long-term evolution (4G LTE) mobile phones on firm performance in the telecommunications manufacturing industry, a setting characterized by a large domestic market but limited upstream electronics capability. Using firm-level data from the 2016 Economic Census and the 2017-2018 Large and Medium Manufacturing Survey, we examine the effects of raising the minimum LCR threshold from 20% to 30% on firm output, labor productivity, imported input intensity, and foreign capital ownership through pooled regressions with firm-level controls. The results show that the stricter LCR threshold is associated with an estimated 53% decline in output and a 35% decline in labor productivity, alongside an 18.1 percentage-point increase in imported input share and a 24.8 percentage-point increase in foreign capital ownership; a complementary specification using the continuous share of domestic inputs yields consistent signs but statistically insignificant estimates. These associational findings suggest that, in the presence of weak domestic component supply chains, stricter LCRs may raise production costs and deepen import dependence rather than foster domestic industrial upgrading. The study contributes firm-level evidence from a major emerging-market context to the literature on non-tariff measures and global value chain participation, and highlights the limits of LCR as a standalone industrial policy absent complementary measures to strengthen domestic intermediate industries.]]>
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