Foreign Ownership and Productivity Growth: Firm Level Evidence from Cameroon

Using a panel data set on Cameroonian manufacturing firms from 1993 to 2005, this paper evaluates the direct and indirect effects of the presence of foreign ownership on the productivity growth of local firms. We investigate spillovers through horizontal and backward linkages, differentiated by the country of origin of foreign investors. The paper also investigates whether and how the absorptive capacity of Cameroonian indigenous firms moderates the effect of foreign presence on productivity. Controlling for the degree of competition, our results indicate that foreign firms perform better than Cameroonian indigenous firms. We find evidence of negative intra- and interindustry spillovers. The analysis also produces evidence of negative spillovers from American, European and Asian affiliates through backward linkages. These negative horizontal and vertical productivity spillovers are mainly due to the limited absorptive capacity of Cameroonian firms, i.e., firms with the highest levels of absorptive capacity suffer the less from foreign presence. The results are robust to the use of different specifications.