On the Performance of Foreign, Domestic Private and State Firms: Does Ownership Matter?

Abstract

The controversy over which firm performs better has continued to grow and research showing divergent result equally grows. This paper looked at the 3 controversial debates often cited in the theory of the business firm. They are the effect of ownership on firm performance, the agency theory hypothesis of management efficiency and the resources endowment postulation of the effect of superior technology on the performance advantage of foreign firms. With survey data and a cross sectional study in Nigeria, there were 3 important revelations made. The first is that ownership structure has no effect on firm performance; secondly, the management of the state firms is less efficient than the private owned ones; and lastly, technology used by the foreign firms is not a source of superiority over the domestic firms in developing countries like Nigeria. Hence, the agency theory is validated but the resource endowment theory was not. The paper concludes that even though ownership does not matter in the efficiency of firms, management really matters.