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Does Foreign Presence Influence the Level of Firm Technical Efficiency? Evidence from Africa

Author

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  • Anthony Orji

    (Department of Economics, University of Nigeria, Nigeria)

  • Jonathan E. Ogbuabor

    (Department of Economics, University of Nigeria, Nigeria)

  • Gabriel Chiangi Aza

    (University of Nigeria, Nigeria)

  • Onyinye I. Anthony-Orji

    (Department of Economics, University of Nigeria, Nigeria)

Abstract

This study investigates the impact of foreign direct investment on the level of firm technical efficiency in West Africa. Firms from Nigeria, Ghana, Sierra Leone and the Gambia were sampled due to the fact that they used to belong to the British Empire. The data, sourced from the World Bank enterprise survey, covers the period from 2006 to 2018, with the sampled countries having data for different years. A time varying stochastic frontier production function for panel was developed for this enquiry. The findings of the study show that foreign direct investment has a significant and positive impact on both technical efficiency and productivity of firms in West Africa. Controlling for other effects, international trade and firm size both have positive and significant effects on firm level technical efficiency. Therefore, policies should be aimed at encouraging more inflows and maintenance of the stock of foreign direct investment to avert divestments. This includes, but is not limited to, ensuring sociopolitical stability and introducing policies that would remove bureaucratic bottlenecks from the path of direct investment inflow and simplify the process of doing business in these countries.

Suggested Citation

  • Anthony Orji & Jonathan E. Ogbuabor & Gabriel Chiangi Aza & Onyinye I. Anthony-Orji, 2021. "Does Foreign Presence Influence the Level of Firm Technical Efficiency? Evidence from Africa," Econometric Research in Finance, SGH Warsaw School of Economics, Collegium of Economic Analysis, vol. 6(1), pages 1-20.
    • Handle: RePEc:sgh:erfinj:v:6:y:2021:i:1:p:1-20
    DOI: https://doi.org/10.2478/erfin-2021-0001
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    Cited by:

    1. Anthony Orji & Kenneth Kama & Jonathan E. Ogbuabor & Onyinye I. Anthony-Orji & Ozoemena Stanley Nwodo, 2022. "Domestic Investment and Capital Flight Nexus in Nigeria: Empirical Evidence from New Data Set," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 176-192.

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