Production Technology Differences Between Canadian-Owned and Foreign-Owned Firms Using Translog-Production Functions

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Summary

The discussion of foreign ownership in Canada frequently refers to a conventional view that foreign-owned firms are larger, more capital-intensive, pay higher wages and are more efficient. Evidence...

The discussion of foreign ownership in Canada frequently refers to a conventional view that foreign-owned firms are larger, more capital-intensive, pay higher wages and are more efficient. Evidence for these characterizations has unfortunately come from comparisons of partial productivity measures of labor or measures of average capital-intensity, with all the uncertainty that this entails. It is the object of this paper to compare the technology characteristics of Canadian and US-owned establishments in Canada by means of a translog production function estimate, utilizing micro level data. While we find strong evidence for the view that the two groups operate with different technologies, and that US-owned establishments are larger, we do not find support for the conventional view that US-owned establishments are more capital-intensive, have higher labor productivity, or lower costs of production.

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