Comparison of technical efficiency between foreign-owned and domestic-owned pharmceutical manufacturing firms in Ghana

Abstract

This study compares technical efficiency levels of foreign-owned firms with that of domestic-owned firms using 2009 survey data of pharmaceutical manufacturing firms in Ghana. Thus, the study attempts to find out whether or not~ (a) foreign-owned firms are more technically efficient than domestic-owned firms, (b) the technical efficiency of foreign-owned firms and that of domestic-owned firms are influenced by the same firm-specific characteristic (socioeconomic) factors and (c) output levels of foreign-owned firms and domestic-owned firms are each, more responsive to capital than to labour. The stochastic frontier production function and the ordinary least squares (OLS) model were respectively used to separately estimate mean technical efficiency of each firms group and the factors that influenced technical efficiency levels of firms. Foreign-owned firms were observed to have greater mean technical efficiency level. Professionals employed, ages of firms' plants and maintenance exercises undertaken by firms were observed to have influenced the technical efficiency levels of both firm groups. The Ghana Investment Promotion Centre should intensify its function to encourage more foreign investors in the pharmaceutical manufacturing industry. Domestic-owned firms should enter into joint venture activities with foreign investors to encourage the transfer of efficiency related technology