Abstract
This study analyzes factors affecting the efficiency (profitability) of enterprises in foreign, joint and domestic ownership in countries with unstable economy. The novelty of the study is that for the first time this kind of analysis has been carried out for the manufacturing industry in Russia, whose economy is characterized by the instability (crisis), external sanctions, and the internal trend for import substitution. Using a panel data on 6134 enterprises operating across several industries in Russia over the period of 2012–2016, the article suggests that generally production efficiency and scale efficiency positively affect profitability, whereas the share of borrowed capital, share of fixed assets and rising interest rates exert negative effects. The contribution of external financial factors is minimal, except for foreign and jointly owned firms. Production efficiency has a particularly pronounced effect for the automotive industry, machinery and equipment manufacturing, and in the metal industry. In contrast, in the chemical, electrical and optical manufacturing, and in food processing industries, internal financial factors emerge as a powerful predictor of performance. Firm ownership does not exert a significant effect on the relationship between the variables of interest when the share of borrowed funds is below 50%. When the share of borrowed capital exceeds 50%, internal financial factors emerge as a particularly prominent predictor of profitability.
Highlights
One of the main generally accepted indicators of enterprise performance is profitability
Regularities related to the profitability of enterprises are identified in various industries in both developed and developing countries, and extant research takes a special interest in the dynamics of profitability indicators in unstable economic conditions
We find that the effect of foreign entry on domestic firm profitability varies according to the ownership structure of domestic firms and the export intensity of foreign newcomers
Summary
One of the main generally accepted indicators of enterprise performance is profitability. As the main indicator of the enterprise’s activity, it is influenced by many factors that reflect both the production efficiency within the company and the influence of the resource and good markets. We can assume the influence of two groups of factors affecting profitability: Spitsin et al Economic Structures (2020) 9:9. Internal factors of the enterprise, reflecting the structure of assets and liabilities, technological features of production, the level of activity of production processes, etc.;. Environmental factors, including both the market conditions for resources and goods, as well as the circumstances prevailing in the economic system at the higher levels (meso-, macro- and megatrends). We scrutinize the extent to which the outcome varies depending on the form of ownership, be that domestic enterprises, foreign enterprises or enterprises in the joint form of ownership
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