n Management Dynamics : Journal of the Southern African Institute for Management Scientists - Productivity and efficiency spillovers generated by the affiliation of multinational firms : the South African business sector as a case study

Volume 13, Issue 1
  • ISSN : 1019-567X



The objective of this study is to investigate the efficiency advantages and spillovers of foreign direct investment from multinational firms for the South African business sector.

The hypothesis that the ownership structure adopted by multinational firms may affect efficiency differently was tested. The analysis was based on a sample of 30 domestic and foreign firms operating in South Africa. The data set provided new information on the sectored composition of multinational ownership and its impact on productivity. A significant result is the positive and important effect on labour productivity as a direct result of the degree of foreign ownership of firms (fully- and majority-owned affiliates). It was also evident that foreign-owned firms appear to be less constrained by financial considerations believed to seriously influence investment decisions, which in turn affect production efficiency.
Other productivity-enhancing factors included the size of the firms, capital intensity, borrowing capacity and cashflow availability. Productivity spillovers benefiting local firms are differentiated by degree of foreign ownership, with minority holdings generating a stronger effect.

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