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Efficiency of Manufacturing in Russia: Effect of Domestic Competition and FDI

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  • Bessonova, Eugenia

    (CEFIR, Moscow, Russia)

Abstract

In this paper we investigate the effect of the entry of foreign firms on the efficiency of Russian industrial enterprises using the panel firm level dataset for 1995-2004. The analysis of the competition structure of Russian industrial sectors reveals that domestic concentration ratios remain high at regional level. We find that foreign entry has positive effect on the productivity of most efficient domestic firms. The effect of foreign entry on productivity of inefficient firms is negative. Our findings show that positive effect from foreign competition appears to be restrained by barriers preventing exit of inefficient firms.

Suggested Citation

  • Bessonova, Eugenia, 2010. "Efficiency of Manufacturing in Russia: Effect of Domestic Competition and FDI," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 17(1), pages 106-127.
    • Handle: RePEc:ris:apltrx:0080
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    References listed on IDEAS

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    1. B. Merlevede & K. Schoors, 2006. "FDI and the Consequences Towards more complete capture of spillover effects," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 06/372, Ghent University, Faculty of Economics and Business Administration.
    2. Jozef Konings, 2000. "The Effects of Foreign Direct Investment on Domestic Firms: Evidence from Firm Level Panel Data in Emerging Economies," William Davidson Institute Working Papers Series 344, William Davidson Institute at the University of Michigan.
    3. Randolph Luca Bruno & Maria Bytchkova & Saul Estrin, 2013. "Institutional Determinants of New Firm Entry in Russia: A Cross-Regional Analysis," The Review of Economics and Statistics, MIT Press, vol. 95(5), pages 1740-1749, December.
    4. Irina Tytell & Ksenia Yudaeva, 2005. "The Role of FDI in Eastern Europe and New Independent States: New Channels for the Spillover Effect," Working Papers w0060, Center for Economic and Financial Research (CEFIR).
    5. Theo Van De Klundert & Sjak Smulders, 1997. "Growth, Competition and Welfare," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(1), pages 99-118, March.
    6. Annette Brown & J. David Brown, 1998. "Does Market Structure Matter?: New Evidence From Russia," William Davidson Institute Working Papers Series 159, William Davidson Institute at the University of Michigan.
    7. Philippe Aghion & Richard Blundell & Rachel Griffith & Peter Howitt & Susanne Prantl, 2009. "The Effects of Entry on Incumbent Innovation and Productivity," The Review of Economics and Statistics, MIT Press, vol. 91(1), pages 20-32, February.
    8. Philippe Aghion & Nick Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2005. "Competition and Innovation: an Inverted-U Relationship," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(2), pages 701-728.
    9. Djankov, Simeon & Hoekman, Bernard M, 2000. "Foreign Investment and Productivity Growth in Czech Enterprises," The World Bank Economic Review, World Bank, vol. 14(1), pages 49-64, January.
    10. Damijan, Joze P. & Knell, Mark & Majcen, Boris & Rojec, Matija, 2003. "The role of FDI, R&D accumulation and trade in transferring technology to transition countries: evidence from firm panel data for eight transition countries," Economic Systems, Elsevier, vol. 27(2), pages 189-204, June.
    11. Konings, Jozef, 2000. "The Effects of Direct Foreign Investment on Domestic Firms: Evidence from Firm Level Panel Data in Emerging Economies," CEPR Discussion Papers 2586, C.E.P.R. Discussion Papers.
    12. Bessonova, Eugenia, 2007. "An Estimation of the Production Efficiency of Russian Industrial Firms," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 6(2), pages 13-35.
    13. repec:lic:licosd:21908 is not listed on IDEAS
    14. Jože P. Damijan & José De Sousa & Olivier Lamotte, 2009. "Does international openness affect the productivity of local firms?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 17(3), pages 559-586, July.
    15. Philippe Aghion & Evguenia Bessonova, 2006. "On Entry and Growth: Theory and Evidence," Revue de l'OFCE, Presses de Sciences-Po, vol. 97(5), pages 259-278.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Kudrin, Alexey & Gurvich, Evsej T., 2015. "A new growth model for the Russian economy," BOFIT Policy Briefs 1/2015, Bank of Finland Institute for Emerging Economies (BOFIT).
    2. Kudrin, Alexey & Gurvich, Evsey, 2015. "A new growth model for the Russian economy1," Russian Journal of Economics, Elsevier, vol. 1(1), pages 30-54.

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    More about this item

    Keywords

    competition; fixed effects estimations; foreign direct investment; total factor productivity; stochastic frontier;
    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
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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