Foreign ownership and firm performance in Sub-Saharan Africa

Abstract

Our study investigates the effects of foreign ownership on firm performance with respect to profitability, productivity, export intensity, and skills acquisition in Sub-Saharan African (SSA) countries. This is particularly important given that in the last three decades, the stock of FDI has increased by over 20,000% in SSA countries. To achieve the objectives of this paper, we employed firm- and country-level data from the World Bank Enterprise Surveys and the World Bank Development Indicators, respectively. Results of the least squares dummy variable (LSDV) and propensity score matching (PSM) estimations showed that foreign ownership was positively associated with higher levels of financial profitability, productivity, exports, and skilled labour acquisition. Policy implications were deduced from the findings.

Keywords:

• Exports
• FDI
• firm performance
• ownership advantages
• Sub-Saharan Africa

JEL CLASSIFICATION CODES::

• D21
• D22
• F21
• O55

Disclosure statement

No potential conflict of interest was reported by the authors.

Figure 1. Schematic representation of the benefits of ownership advantages. Diagrammatic sketch is that of the authors.

Additional information

Notes on contributors

Allan Webster

Allan Webster is a Professor of Economics at Bournemouth University, UK. His core research interests are in the interaction between trade and FDI on the one hand and labour markets on the other. In recent years this has spilled over into an interest in tourism and labour market aspects of tourism in particular. He has published widely in top quality journals.

Godwin Okafor

Godwin Okafor is a Senior Lecturer in Economics at De Montfort University, UK. He has a PhD from Bournemouth University, UK. Godwin's research interests are in the areas of International Economics and Development Economics. Subsequently, his research interests have generated outputs in top quality journals.

Ciara Barrow

Ciara Barrow is a Business Studies graduate from Bournemouth University, UK.