The Determinants of FDI Inflows in the Indonesian Manufacturing Sector: Some Evidence from Spatial Dependency Measurements

The determinants of Foreign Direct Investment (FDI) inflow in the manufacturing sector of Indonesian provinces are the focus of this study. This study demonstrates that spatial dependency in Indonesian FDI location decisions is primarily influenced by cultural heterogeneity and geographic distances, as determined by the Spatial Durbin Model. This finding suggests that the inflow of FDI into a host province is influenced by FDI inflow and other factors in neighboring provinces that are geographically adjacent to the host province and have a similar level of cultural heterogeneity. The primary determinants of these factors are the infrastructure in neighboring provinces and the human capital and innovation capability of the host province.