All countries are faced with various challenges in competing with other countries globally. Encouraging industries to increase their productivity is a significant challenge. Foreign Direct Investment (FDI) through Multinational Enterprises (MNEs) is one of the important channels and a strong catalyst for achieving national economic development. This paper examines the technology gap's impact on domestic firms' labor productivity. This study uses a panel dataset of Indonesian Large and Medium Enterprises (LMEs) in 24 industries between 2010 and 2015. The fixed effect estimation method has been used with different model specifications. The results reveal a technology gap in which varying roles influence spillover depending on the industry being considered.

Keywords  

FDI, Labor productivity, Spillovers, Technology gap, Indonesia