International Trade on IPR, Economic Growth, and FDI in Indonesia’s Manufacturing Sector

Purpose – Indonesia has always experienced a deficit in the balance of payments in the Intellectual Property Rights (IPR) sector. However, it is hoped that the high value of Indonesian IPR imports will be beneficial in increasing the attractiveness of FDI, encouraging economic growth, and increasing IPR exports. The purpose of this research is to examine the causal relationship between IPR imports (MIPR), IPR exports (XIPR), incoming FDI in the manufacturing sector (FDI), and economic growth (GGDP) in the case of Indonesia. Design/Methodology/Approach – The data used in this research are time series data from the first quarter of 2004 to the fourth quarter of 2021. These data are analyzed using the VECM approach. Findings – The study results show that MIPR has dominated Indonesia’s total trade in this sector. The contribution of import value is 95 percent compared to exports, which are only 5 percent. The VECM estimation results show a one-way Granger causality relationship from the independent variables (FDI, GGDP, and XIPR) to MIPR as a dependent variable. In a short-term causality relationship, IPR imports encourage FDI inflows into Indonesia. Then, FDI in the manufacturing sector significantly impacts Indonesia’s IPR exports. Research Implications – Indonesia’s outflow of money to pay for the use of foreign IPR can encourage the entry of FDI in the manufacturing sector, resulting in a technology transfer that produces domestic IPR, which can be sold abroad.