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

Anthony Orji; Jonathan E. Ogbuabor; Gabriel Chiangi Aza; Onyinye I. Anthony-Orji

doi:10.2478/erfin-2021-0001

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 http://orcid.org/0000-0003-4032-7051

DOI: https://doi.org/10.2478/erfin-2021-0001

Keywords: Foreign Direct Investment, Technical Efficiency, Stochastic Frontier Analysis

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.

Author Biography

Onyinye I. Anthony-Orji, Department of Economics, University of Nigeria, Nigeria

Anthony Orji is a Ph.D holder in Economics and a lecturer in the Department of Economics, University of Nigeria Nsukka. He is an Alumnus of the African Programme on Rethinking Development Economics (APORDE), Johannesburg, and a Visiting Scholar to the University of Laval, Quebec, Canada. He has published widely and attended several conferences. He is a member of many research organisations and has participated in several research projects funded by the following institutions: World Bank; Partnership for Economic Policy (PEP), African Economic Research Consortium (AERC) and others. His research interests is in Development Economics, Gender Issues, Finance and Resource Mobilization.

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