Turnover, ownership and productivity in Malaysian manufacturing

Abstract

Applying Foster, Haltiwanger, and Krizan's decomposition of productivity growth method to Malaysian manufacturing census data for 2000 and 2005, we analyze if firm turnover by ownership (domestic vs. foreign) has any impact on the sector's aggregate productivity growth. The findings show that turnover matters regardless of ownership, but more importantly, attracting foreign direct investment inflows could induce positive net entry effect'. The analysis shows that large-sized foreign and domestic entrants are more productive than medium-sized and especially small-sized ones. The study provides important implications for government policies based on ownership and firm size.