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by Someshwar Rao and Jianmin Tang, Industry Canada, February 2000
The purpose of this paper is to analyse the multi-factor productivity (MFP) gap between Canadian- and foreign-controlled manufacturing firms. The evidence from micro (firm-level) data suggests that Canadian-controlled firms, on average, were 25 percent less productive than their foreign-controlled counterparts over the 1985 to 1988 period. The MFP gap, however, narrowed to about 16 percent during the 1989 to 1995 period. Labour quality, unionization, firm size, and industry dummies are significant determinants of inter-firm variations in productivity levels. However, they did not contribute to the MFP gap between Canadian- and foreign-controlled firms. In addition, contrary to popular perceptions, Canadian-controlled firms are not concentrated in low-productivity industries.