Determining the influence and role of MNEs in industrial cluster performance: A case study of Indonesia's electronics industry

The Indonesian government has stated that industrial clustering has been chosen as a strategy for improving industrial sector performance. The electronics industry is currently the second largest contributor to Indonesia's exports, and involves both local and multinational players. With the global and knowledge intensive nature of the electronics industry, the approach for industrial upgrading may differ from that in other industries. This study maps the current stage of electronics industry clustering, and explores the role of business players, especially multinational enterprises (MNEs), in the clustering and development of local firms. The study found that the Panasonic Partners Club (PPC) can be viewed as a role model in the development of electronics industry clustering. PPC is a network of an MNE, foreign buyers and local suppliers, who work together to maximise the benefits associated with a global value chain. PPC was developed voluntarily. The MNE provides important contributions to the development of firms in an industrial cluster, by facilitating the upgrading of local supplier firms to meet global standards, mediating the transfer of knowledge among cluster members, and helping local firms in R&D activities. While other MNEs in the electronics industry have not established such strong relationships with local suppliers as Panasonic Manufacturing Indonesia, key factors of cluster establishment in the electronics industry in Indonesia are discussed.