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Ownership and technical efficiency in Malaysia's automotive industry: A stochastic frontier production function analysis

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  • Noor Aini Khalifah

Abstract

This article examines the direct effect of the extent of foreign ownership on technical efficiency in Malaysia's automotive industry by applying a stochastic frontier production function analysis to micro-panel data over the years 2000--2004. Technical efficiency in the overall automotive industry is positively related to the degree of vertical integration, the size of establishments in the respective sub-sectors, a higher quality of the work force, and a higher foreign ownership share in the establishment combined with higher net-import intensity. Foreign ownership and net-export intensity are not significant determinants of technical efficiency inthe parts sub-sector. Although majority foreign ownership is not allowed in the assembly sub-sector, this sub-sector is large, with asmall number of establishments generating scale economies in the automotive industry. The determinants of technical efficiency in the parts sub-sector show that foreign ownership per se does not enhance technical efficiency since other determinants like the degree of vertical integration and the size of establishments are significant determinants of technical efficiency.

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  • Noor Aini Khalifah, 2013. "Ownership and technical efficiency in Malaysia's automotive industry: A stochastic frontier production function analysis," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 22(4), pages 509-535, June.
    • Handle: RePEc:taf:jitecd:v:22:y:2013:i:4:p:509-535
    DOI: 10.1080/09638199.2011.571702
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    1. Botrić, Valerija, 2021. "Firm-level Inefficiency in Post-transition Economies," Proceedings of the ENTRENOVA - ENTerprise REsearch InNOVAtion Conference (2021), Hybrid Conference, Zagreb, Croatia, in: Proceedings of the ENTRENOVA - ENTerprise REsearch InNOVAtion Conference, Hybrid Conference, Zagreb, Croatia, 9-10 September 2021, pages 34-43, IRENET - Society for Advancing Innovation and Research in Economy, Zagreb.
    2. Choong, Pai Wei & khalifah, noor & Mohd Nor, Abu Hassan Shaari & Ismail, Mohd Adib, 2018. "Free Trade Agreements and Production Sharing in Malaysian Manufacturing Industries," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 52(3), pages 91-106.
    3. Alfonso Mendoza-Velázquez & Francisco Benita, 2019. "Efficiency, Productivity, and Congestion Performance: Analysis of the Automotive Cluster in Mexico," Journal of Industry, Competition and Trade, Springer, vol. 19(4), pages 661-678, December.
    4. Kovárník Richard & Staňková Michaela, 2023. "Assessing the Technical Efficiency of European Companies in the Automotive Sector," LOGI – Scientific Journal on Transport and Logistics, Sciendo, vol. 14(1), pages 251-262, January.
    5. Adugna Lemi & Ian Wright, 2020. "Exports, foreign ownership, and firm-level efficiency in Ethiopia and Kenya: an application of the stochastic frontier model," Empirical Economics, Springer, vol. 58(2), pages 669-698, February.

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