ABSTRACT
A firm’s location determines access to certain economic inputs and trade facilities. The presence of adequate infrastructure and agglomeration economies may boost a firm’s export potential. We investigated whether export performance of firms in industrial estates was better than those firms outside industrial estates. We then assessed how industrial estate characteristics determined the export decision of firms in industrial estates. The treatment effect method was used to examine the export performance of firms, and the probit model was developed to explain how industrial estate characteristics (port distance, port capacity, electricity, water, number of tenants and fiscal incentive) affected a firm’s export decision. To strengthen the quantitative analysis, we conducted a qualitative analysis through in-depth interviews with the industrial estate top-level managers and related institutions. The results showed that export performance of firms in industrial estates was better than those outside industrial estates. The role of many industrial estate characteristics was significant to the firms’ decision to export especially in the Greater Jakarta area. Infrastructure such as electricity and water positively affected the firms’ decision to export, but had an opposite direction effect in regions outside Greater Jakarta. Agglomeration economies, which were represented by the number of manufacturing firms, had encouraged firms to export. In addition, government fiscal policy was effective in improving export decision of firms in industrial estates.
