<abstract xmlns="http://www.w3.org/1999/xhtml"><p>A large number of studies have compared the performance of foreign-owned and domestic firms. However, only a limited number of studies have investigated the effect of the degree of foreign ownership on a firm's performance. We attempt to fill this gap in the literature by conducting research that distinguishes not only between domestic and foreign-owned firms, but also between wholly and partly foreign-owned firms. We also examine the possible non-linearity of the performance-ownership relationship. We divide the firms in our study into three groups by their ownership - domestic, foreign, and joint ventures. We use a regression analysis to explore whether foreign ownership influences the firms' performance, measured by several variables such as profitability, innovation performance (measured by gross expenditures on research and development activities), numbers of employees involved in research and development, production, value added, leverage and net working capital intensity. The results of our research indicate that there is a statistically significant difference in firms' performance as a result of foreign ownership in all variables except the number of research and development employees and leverage. Moreover, we show that foreign ownership and performance are linked by an inverted U-shaped relationship. A firm’s performance increases with greater foreign ownership up to the range of 61-65 %, and declines thereafter.</p></abstract>

A large number of studies have compared the performance of foreign-owned and domestic firms. However, only a limited number of studies have investigated the effect of the degree of foreign ownership on a firm's performance. We attempt to fill this gap in the literature by conducting research that distinguishes not only between domestic and foreign-owned firms, but also between wholly and partly foreign-owned firms. We also examine the possible non-linearity of the performance-ownership relationship. We divide the firms in our study into three groups by their ownership - domestic, foreign, and joint ventures. We use a regression analysis to explore whether foreign ownership influences the firms' performance, measured by several variables such as profitability, innovation performance (measured by gross expenditures on research and development activities), numbers of employees involved in research and development, production, value added, leverage and net working capital intensity. The results of our research indicate that there is a statistically significant difference in firms' performance as a result of foreign ownership in all variables except the number of research and development employees and leverage. Moreover, we show that foreign ownership and performance are linked by an inverted U-shaped relationship. A firm’s performance increases with greater foreign ownership up to the range of 61-65 %, and declines thereafter.

The effect of the degree of foreign ownership on firms' performance

University of Economics in Bratislava, Faculty of Business Economics with seat in Košice, Department of Management, Tajovského 13, 041 30 Košice, Slovakia.

Review of Economic Perspectives

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

{"article-title":"The effect of the degree of foreign ownership on firms' performance"}

A large number of studies have compared the performance of foreign-owned and domestic firms. However, only a limited number of studies have investigated the...

The effect of the degree of foreign ownership on firms' performance

Published Online: Mar 17, 2016

Page range: 29 - 44

Received: Jun 30, 2015

Accepted: Jan 29, 2016

DOI: https://doi.org/10.1515/revecp-2016-0003

Keywords
performance, foreign ownership, foreign investor, joint ventures, Slovak republic

© 2016 Aneta Bobenič Hintošová et al., published by De Gruyter Open

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

The effect of the degree of foreign ownership on firms' performance

Published Online: Mar 17, 2016

Page range: 29 - 44

Received: Jun 30, 2015

Accepted: Jan 29, 2016

DOI: https://doi.org/10.1515/revecp-2016-0003

Keywordsperformance, foreign ownership, foreign investor, joint ventures, Slovak republic

© 2016 Aneta Bobenič Hintošová et al., published by De Gruyter Open

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Keywords
performance, foreign ownership, foreign investor, joint ventures, Slovak republic