Indonesia: Bargaining and dependency in the petroleum and textile industries

This study analyses state autonomy and the ability of Third World host states and local firms to erode the transnational corporations' three firm-specific assets--finance, technology, and markets. Utilising the regressive-dependency, dynamic-dependency, and bargaining "balance of power" perspectives, this study places the theoretical literature on state/transnational relations in historical context. This contextual relevance is brought out in an analysis of the Indonesian textile and petroleum industries from 1949 to the late 1980s.;The study finds that host states require strong institutions to increase their bargaining power with transnationals. Knowledge of the operational characteristics of the capitalist system and industry structure is an invaluable resource for the dependent state. Changing orientations within the state apparatus, international and domestic factors aid or hinder the erosion process at different historical junctures. The dependent state that starts from a regressive dependency position with respect to transnationals begins the process of climbing a learning curve to erode their power. It may succeed in undermining the original bargain with transnationals.;The level of technological dynamism and firm mobility in an industry determine the relative success with which host states and local firms can now overcome entry barriers. In Indonesia, the state remains partially dependent on the upstream petroleum transnationals' firm-specific services. In the standardised segment of the textile industry local firms can displace transnationals when a decade ago the transnational connection was essential to their emergence as industrial entrepreneurs.;In the oil supply and services sector and the garment industry, the technological dynamism and firm mobility of transnationals keep to varying degrees local firms and the host state dependent on transnationals in varying degrees depending on the technical and marketing sophistication of local firms and their ability to raise finances independently. The study concludes that while the host state and local firms may be partially dependent, bargaining continues to be viable.