This study explores the relationship between firm performance and firm survival in Indonesia’s manufacturing sector. Using firm-level census data from medium and large manufacturing enterprises (1995–2015), the research applies advanced econometric models to assess survival dynamics.
Efficiency is calculated through a translog model based on both time-invariant and time-varying production functions, while the Ackerberg–Caves–Frazer (ACF) model is employed to address endogeneity in production function estimation. To analyze survival outcomes, two methods are applied: the Cox proportional hazard model (using firm-level data) and Poisson regression (using aggregate 2-digit ISIC data).
The results show that higher efficiency reduces the hazard ratio, thereby increasing firm survival time. At the aggregate level, efficiency not only improves survival chances but also encourages firm entry while reducing firm exit from the Indonesian market. These findings underline the critical role of technical efficiency in shaping the long-term viability and competitiveness of manufacturing enterprises in Indonesia.
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