A Performance Analysis of Domestic vs. Foreign-owned firms: An Industry Approach

Abstract

The study aims to compare the differences in performance between foreign-owned firms, as compared to Spanish ones. Departing from different international business theories, the main assumption is that companies with foreign capital obtain higher levels of performance that the local counterparts. Using a sample of 22,210 firms from eight different sectors, very relevant for the Spanish economy, we analyze three different measures of performance: profitability, productivity and efficiency. The selected sectors belong to the industries of automobile manufacturing, construction, trade and tourism. Broadly, our results present a strong dominance of foreign-owned firms in profitability and productivity. However, in the efficiency analysis, foreign companies often being bigger in size obtain better output-oriented efficiencies, whereas smaller Spanish ones achieve higher results in the efficiency of their inputs. Also, the tourism sector show a higher strength among Spanish firms, likely due to the knowledge of the local context.