Indonesia's missing multinationals: business groups and outward direct investment

Some countries produce more multinational enterprises (MNEs) than others. India and China, in particular, have produced a number of dynamic MNEs whose success abroad generates important economic benefits for the home economy. Motivated by this observation, we describe the internationalisation record of Indonesia's major business groups. Using an archival analysis method, we find that, with a few exceptions, Indonesia's largest business groupings focus predominantly upon the domestic market. We advance two explanations for this investment pattern. The first suggests that the apparent absence of Indonesian MNEs is an accounting error, because firms’ outward investment is under-reported in official statistics. The second suggests that Indonesian outward foreign direct investment is impeded by a combination of institutional and firm-level factors that arrest the internationalisation of all but the largest firms. We discuss the policy implications of these findings and reflect on their theoretical implications.