“The manufacturing industry is the main driving force for Indonesia’s economic growth as a developing country. Competitive Advantage of the manufacturing industry absolutely needs to be built, especially in entering the era of free competition in the ASEAN Economic Community. Dynamic Capabilities are organizational capabilities that are fundamental to achieving Financial Performance and are one of the keys to business success and allow companies to create, deploy and protect their own intangible assets to support higher performance in the long term,” said Dr. Andi Wijayanto, S.Sos, M.Si., Lecturer at the Department of Business Administration, Faculty of Social and Political Sciences (FISIP), Diponegoro University (Undip).

Dr. Andi’s research took a sample of manufacturing companies listed on the Indonesia Stock Exchange. Manufacturing companies were chosen for several reasons. First, the manufacturing sector is a driver of economic growth in Indonesia. Second, the lack of commitment to build Dynamic Capabilities in manufacturing companies in Indonesia. Only a small number of manufacturing companies allocate their budget for R&D activities (31 out of 122 companies). Third, competition is getting tougher among producers from ASEAN countries.

In Indonesia, manufacturing companies do not yet have a high competitive advantage. The average ratio of Excess Funds (ExF) from 2010 to 2016 was negative. This means that the average company has higher financial liabilities than its financial assets. This prevents companies from retaliating against competitor attacks.

“Companies should build competitive advantage in order to enjoy higher performance and corporate value. Companies must have a combination of valuable, rare, difficult to imitate and substitute resources with the capability to dynamically adapt to environmental changes. Since technological and information developments have further reduced the resource gap,” he concluded.  (Lin/Joshua – Public Relations)

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