Regulatory incentives vs. resource capacity: Determinants of sales performance in Indonesia's security printing industry

Indonesia's industrial strategy increasingly relies on protectionist measures, particularly the Domestic Component Level (Tingkat Kandungan Dalam Negeri – TKDN) and Corporate Benefit Weight (Bobot Manfaat Perusahaan – BMP), to foster domestic industrial competitiveness. However, the efficacy of these regulatory instruments in driving actual firm performance remains contested, especially in high-barrier sectors characterized by monopsonistic market structures. This study scrutinizes the relative impact of regulatory compliance (TKDN and BMP) versus internal resource capacity on sales performance within Indonesia's strategic security printing industry. Employing a quantitative approach, we analyze balanced panel data from ten strategic security printing firms over a five-year period (2019–2023), yielding 50 firm-year observations. Using a fixed effects model (FEM) with robust standard errors to control for firm-specific heterogeneity and address heteroscedasticity, our empirical analysis reveals a counterintuitive finding: regulatory incentives (TKDN and BMP) do not exert a statistically significant influence on sales volume. Conversely, internal resource capacity, proxied by firm size (total assets), emerges as the sole positive and significant determinant (p < 0.01). These findings suggest that in this capital-intensive industry, TKDN and BMP certifications currently function primarily as administrative entry barriers for tender eligibility, what we term a 'compliance trap', rather than as drivers of competitive advantage. This supports the resource-based view (RBV), positing that physical asset scale and production capacity outweigh regulatory incentives in determining market outcomes in concentrated procurement environments. The study contributes to the industrial policy literature by empirically disentangling the effects of administrative compliance from resource capacity, with implications for both managerial strategy and regulatory design in emerging economies.