Influence of international ownership on West African firms

Issues of economic development and the interaction of multinational enterprise (MNE) presence and formation and success of small and medium-sized enterprises (SMEs) in developing countries have dominated the research agenda at various policy levels. One major element of successful development in Africa is the formation of a viable local industry and in particular small and medium-sized enterprises. There is a documented positive correlation between small and medium-sized enterprise (SME) formation and performance and economic development. This is particularly true in West Africa where SMEs are underrepresented and face a variety of development obstacles.

Empirical evidence suggests that local SMEs may lack access to a variety of vital resources. Hence international ownership participation – or interaction with MNEs – may provide access to financing, technology, and global upstream and downstream markets.

Firm performance and its relationship to international supply chains has been well explored for firms in developed economies but this is not the case for firms in developing economies, largely due to lack of data. Studies focusing on developing economies contain either macroeconomic research on FDI, export-led development or they present survey-based evidence on firm performance; detailed financial evidence on the firm-level is lacking.

This paper aims at filling this gap. We identify several hundred internationally-owned firms in West Africa and examine the impact of ownership structure on firm performance. We use a panel with several thousand observations for the years 2006-2015 from the Bureau van Dijk Orbis data base accessed in 2015 & 2016. The database is publicly available with a fee. We analyzed our data using descriptive statistics, as well as ordinary least squares and customary panel data statistics. Our results reveal a clear ownership-specific pattern.

Furthermore, in West Africa, historically, international connections may take a “French” or an “English” route to internationalization. We investigate whether it makes a difference for individual firm performance which route is taken.