Research Aims: This research aimed to investigate vertical partnerships between Original Equipment Manufacturers (OEMs) and first-tier automotive component firms based on the relationships between technology transfer, technical exchange, government role and supplier performance in the Greater Jakarta area.

Design/Methodology/Approach: A total of 65 respondent firms participated, comprising 6 OEMs and 59 first-tier firms. The research included site visits and interviews with companies based on questionnaires completed by representative individuals from middle management upward with responsibility for assessing product quality (purposive sampling). The questionnaire results were measured using Partial Least Squares Path Modelling (PLS-PM).

Research Findings: The results highlighted significant relationships between government role and technology transfer (p-value = 0.00), government role and supplier performance improvement (p-value = 0.017), and technical exchange and supplier performance improvement (p-value = 0.077). However, no significant relationship was found between technology transfer and supplier performance improvement (p-value = 0.353).

Theoretical Contribution/Originality: Understanding the vertical relations between OEMs and first-tier automotive component firms in Indonesia.

Managerial Implications in the South East Asian Context: Solid relationships between OEMs and first-tier companies in Greater Jakarta, Indonesia are especially triggered by the increasing tendency for local component use (TKDN/Domestic Component Level).

Research limitation & Implications: The research examined vertical relationships between OEMs and first-tier firms, notably between technology transfer and supplier performance improvement, technical exchange and supplier performance improvement, government role and technology transfer, and government and supplier performance improvement.


Abdillah, W., & Jogiyanto, H. M. (2015). Partial least square: Alternatif structural equation modelling (SEM) dalam penelitian bisnis. Yogyakarta: Penerbit Andi.

Ahman, M. (2006). Government policy and the development of electric vehicles in Japan. Energy Policy, 34(4), 433–443.

Bresnen, M. (1996). An organisational perspective on changing buyer-supplier relation: A critical review of evidence. Organization Articles, 3(1), 121–145.

Chu, W. W. (2011). How the Chinese government promoted a global automobile industry. Industrial and Corporate Change, 20(5), 1235–1276.

Cousin, P. D., & Spekman, R. E. (2003). Strategic supply and the management of inter and intra organisational relationship. Journal of Purchasing and Supply, 9(1), 19–29.

Hair, J. F., Hult, G. T., Ringle, C. M., & Sarstedt, M. (2014). A primer on partial least squares structural equation modelling (PLS-SEM). Thousand Oaks: Sage.

Hartono, G., & Santoso, E. (2013). Analisis penetapan strategi peningkatan tingkat komponen dalam negeri (TKDN) pada industri manufaktur di Indonesia: Studi kasus pada komponen kopling. INASEA, 14(1), 83–88.

Irawati, D. (2012). Knowledge transfer in the automobile industry: Global-local production network. London: Routledge.

Ivarsson, I., & Alvstam, C. G. (2004). International technology transfer to local suppliers by Volvo trucks in India. Tijdscharift Voor Economische En Sociale Geografie, 95(1), 27–43.

Jan, T. S., & Hsiao, C. T. (2004). A four-role model of the automotive industry development in developing countries: A case in Taiwan. Journal of the Operational Research Society, 55(11), 1145–1155.

Kadir, K. A., Tam, O. K., & Ali, H. (2011). Pattern of supplier learning: Case studies in the Malaysian automotive industry. Asean Academy of Management Journal, 16(1), 1–20.

Kim, L. (1997). Imitation to innovation: The dynamics of Korea's technological learning (management of innovation and change). Boston: Harvard Business School Press.

Kotabe, M., Martin, X., & Domoto, H. (2003). Gaining from vertical partnerships: Knowledge transfer, relationship duration, and supplier performance improvement in the US and Japanese automotive industries. Strategic Management Journal, 24(4), 293–316.

Lee, O. K., & Oakes, L. K. (1996). Templates for change with supply chain rationalism. International Journal of Operations and Production Management, 16(2), 197–209.

Leenders, M. R. (1966). Supplier development. Journal of Supply Chain Management, 2(4), 47–62.

Leisk, C., & Wormaid, J. (1992). Supplier innovation: Building tomorrow's components industry. London: The Economist Intelligence Unit.

Lettice, F., Wyatt, C. & Evans, S. (2010). Buyer–supplier partnerships during product design and development in the global automotive sector: Who invests, in what and when? International Journal of Production Economics, 127(2), 309–319.

Lin, S. H., & Weng, Y. (2020). Can strengthening the local content requirements meet a government's need to raise industrial productivity and production? Journal of Applied Economics, 23(1), 316–328.

Oh, J., & Rhee, S. (2008). The influence of supplier capabilities and technology uncertainty on manufacturer-supplier collaboration: A study of the Korean automotive industry. International Journal of Operations and Production Management, 28(6), 490–517.

Oliver, N., Holweg, M., & Carver, M. (2008). A system perspective on the death of a car company. International Journal of Operations and Production Management, 28(6), 562–583.

Sadangharn, P. (2017). An elderly employment model for the Thai Automotive Industry. The South East Asian Journal of Management, 11(2), 103–119.

Saluy, A. B., Abidin, Z., Djamil, M., Kemalasari, N., Hutabarat, L., Pramudena, S. M., & Endri, E. (2021). Employee productivity evolution with human capital management strategy: The case of covid-19 in Indonesia. Academy of Entrepreneurship Journal, 27(5), 1–9.

Schumacker, R. E., & Lomax, R. G. (2010). A beginner’s guide to structural equation modeling (3rd ed.). Routledge/Taylor & Francis Group.

Sitompul, R. F., Endri, E., Hasibuan, S., Jaqin, C., Indrasari, A., & Putriyana, L. (2022). Policy challenges of Indonesia's local content requirements on power generation and turbine production capability. International Journal of Energy Economics and Policy, 12(1), 225–235.

Syah, D. O. (2019a). Identifying the factor that promotes vertical partnerships: Empirical evidence from first tier and second tier companies in Jabodetabek-Indonesia. Indonesian Journal of Science & Technology, 4(1), 119–133.

Syah, D. O. (2019b). Identifying vertical partnership among component companies: Empirical evidence from automotive industry in Jabodetabek, Indonesia. Journal of Economic Structures, 8(33), 1–25.

Thomas, R. & Oliver D. (1991). Components supplier pattern in the UK motor industry. Omega, 19(6), 609-616.

Twigg, D. (1998). Managing product development within a design chain. International Journal of Operations & Production Management, 18(5), 508–524.

Vinzi, V. E., Trinchera, L., & Amato, S. (2010). PLS path modeling: from foundations to recent developments and open issues for model assessment and improvement. Handbook of partial least squares, 47-82.

Wetzels, M., & Odekerken, G. (2009). Using PLS path modeling for assessing hierarchical construct models: Guidelines and empirical illustration. MIS Quarterly, 33(1), 177–195.

Zapata, C., & Nieuwenhuis, P. (2010). Exploring innovation in the automotive industry: New technologies for cleaner cars. Journal of Cleaner Production, 18(1), 14–20.

Zirpoli, F., & Caputo, M. (2002). The nature of buyer-supplier relationship in ca-design activities: The Italian auto industry case, International Journal of Operations & Production Management, 22(12), 1383–1410.