Impact of Foreign Ownership and Domestic Supply Base on Manufacturing Plant Performance

Abstract

In this paper we examine how foreign ownership and domestic supply base affect manufacturing plant performance under two distinct types of environmental contingency – demand uncertainty and macro-economic instability. A large-scale dataset was specifically assembled for the purpose of this research investigation by combining performance and practice related survey data for more than 500 manufacturing plants from Global Manufacturing Research Group (GMRG) with secondary macro-economic data for 13 countries from the World Economic Forum (WEF), Organization for Economic Cooperation and Development (OECD) and Eurostat. Multi-level regression analysis results show that domestic supply base is positively associated with plant performance. Foreign ownership is positively associated with performance when the plants face macro-economic instability. The results further show that in the presence of both high demand uncertainty and macroeconomic instability, the joint effect of domestic supply base and foreign ownership becomes important for plant performance. We discuss the theoretical and managerial implications of the findings and offer directions for future research.