Does the Rabbit's Foot Actually Work? The Causal Effect of Foreign Ownership on Firm Productivity in Three ASEAN Countries
Abstract: Voluminous studies
have examined the relationship between foreign ownership and firm productivity.
Two general patterns emerge at the empirical level: they are essentially
correlational and results are mixed. This paper estimates the causal effect of
foreign presence on a variety of productivity measures. We rely on a selection on observables
approach based on
the idea that
all variables that
influence foreign ownership
status and firm productivity are fully captured by the
available control variables, eliminating the problem of selection bias. Using firm-level data from three
ASEAN countries, the
study finds that
productivity of foreign-owned
firms is consistently above that
of domestically-owned firms regardless of different productivity measures and
types of matching algorithms. This result suggests to a large extent the
benefits of foreign participation in the economy.
Author: Inggrid
Journal Code: jptindustrigg150006
