The relationship between technical efficiency and industial concentration: Evidnce from the Indonesian food and beverages industry

This paper investigates the relationship between technical efficiency and industrial concentration in the Indonesian food and beverages sector. Firm-level data obtained from the Indonesian Bureau of Central Statistics (BPS) are used to estimate technical efficiency scores and calculate measures of industrial concentration. The results show that the food and beverages industry is characterized by high industrial concentration and firms in the industry are inefficient. The Granger-causality test suggests a one-way direction of causality, with industrial concentration having a negative impact on technical efficiency, at the sector level. This suggests that the quiet-life hypothesis, rather than the efficient-structure hypothesis, applies to the Indonesian food and beverages industry