Foreign ownership and firm performance: Evidence from the South African informal sector
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Date
2024-05-24
Authors
Bolarinwa, Segun Thompson
Simatele, Municinga
Kapingura, Forget Mingiri
Journal Title
Journal ISSN
Volume Title
Publisher
Taylor and Francis Group, Routledge
Abstract
This paper investigates the effect of foreign ownership on firm performance in the South African informal sector. Using the data of 1097 informal businesses sourced from the World Bank Enterprises Survey conducted in four Township provinces in South Africa (Gauteng, KwaZulu-Natal, Eastern Cape and Western Cape) in 2020, the paper aims to address two issues: what is the effect of foreign ownership on performance in the South African informal sector and what factors drive foreign-ownership gap in the South African informal sector if it exists? The empirical analysis uses the multivariable decomposition technique and finds a performance gap between locally and foreign-owned businesses in the South African informal sector. A decomposition of factors shows that differences in endowments can explain the bulk of the gap. Discriminatory/unexplained factors, likely capturing the business culture, also play a significant role. Caution is given when seeking to curb foreign business participation in the informal sector.
Description
Research paper
Keywords
Foreign ownership, informal sector, multivariate decomposition, South Africa
Citation
Segun Thompson Bolarinwa, Munacinga Simatele & Forget Kapingura (2024) Foreign ownership and firm performance: Evidence from the South African informal sector, Development Southern Africa, 41:3, 588-609, DOI: 10.1080/0376835X.2024.2352061