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Does Productivity Differ in Domestic and Foreign Firms? Evidence from the Indian Machinery Industry

Author

Listed:
  • SHARMA, CHANDAN

    (FORE School of Management)

Abstract
This study aims to evaluate the productivity performance of foreign and domestic firms of the machinery industry in India. Using information of more than 200 firms of three sub-industries namely electrical, electronics and non-electrical, we compare both types of firms’ total factor productivity (TFP) for the period of 1994-2006. At the first stage, our empirical analysis utilizes a non-parametric approach based on the principle of first order stochastic dominance. Comparing the distributions of the measures of firms’ performance across the groups, we find that the distributions for foreign firms dominate that of domestically owned Indian firms in two industries. In the next stage, the study estimates determinants of productivity growth of firms. The results of our analysis suggest that in the electrical industry foreign ownership matters, however, in other two industries there is no significant difference between both types of firms. The results also reveal that those firms which import and have in-house R&D facilities are more productive. Finally, the role of public infrastructure is found to be vital in the firms’ productivity growth for the sample of industries considered.

Suggested Citation

  • Sharma, Chandan, 2010. "Does Productivity Differ in Domestic and Foreign Firms? Evidence from the Indian Machinery Industry," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 45(1), pages 87-110.
    • Handle: RePEc:dse:indecr:0016
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    Citations

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    Cited by:

    1. Koray Aktas & Valeria Gattai, 2021. "Inward FDI, outward FDI, and firm-level performance in India," Working Papers 481, University of Milano-Bicocca, Department of Economics, revised Sep 2021.
    2. Chandan Sharma, 2016. "R&D, Technology Transfer And Productivity In The Indian Pharmaceutical Industry," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 20(01), pages 1-24, January.
    3. Sharma, Chandan, 2011. "R&D and productivity in the Indian pharmaceutical firms," MPRA Paper 31681, University Library of Munich, Germany.
    4. Swarnjeet Kaur & Swati Mehta, 2024. "Liberalisation and Technological Accumulation Strategy in Industries from Developing Economies: An Analysis of Indian Capital Goods Manufacturing Firms," Millennial Asia, , vol. 15(2), pages 300-326, June.
    5. Kawaljeet Kaur & Swati Mehta, 2023. "Modes of Technology Accumulation, Total Factor Productivity and Indian Manufacturing Sector: Firm-Level Analysis," Journal of South Asian Development, , vol. 18(1), pages 7-43, April.
    6. Sharma, Chandan & Mishra, Ritesh Kumar, 2015. "International trade and performance of firms: Unraveling export, import and productivity puzzle," The Quarterly Review of Economics and Finance, Elsevier, vol. 57(C), pages 61-74.
    7. Saripalle, Madhuri, 2015. "Tamil Nadu’s Electronics Industry Lessons for ‘Make in India'," MPRA Paper 95331, University Library of Munich, Germany.
    8. Wang, Manyu & Huang, Ying & An, Zidong & Wei, Chu, 2023. "Reforming the world's largest heating system: Quasi-experimental evidence from China," Energy Economics, Elsevier, vol. 117(C).
    9. Awadhesh Pratap SINGH, 2016. "Do Technology Spillovers Accelerate Performance of Firms? Unravelling a Puzzle from Indian Manufacturing Industry," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 3, pages 108-120.

    More about this item

    Keywords

    Total Factor Productivity; Machinery Industry; Foreign firms;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L64 - Industrial Organization - - Industry Studies: Manufacturing - - - Other Machinery; Business Equipment; Armaments
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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