Archive of Journal - Financing

Financing – scientific magazine for economy

ISSUE 2023, No. 1, Article 2, Year of publication: 14, March, 2023
Total factor productivity (tfp) of foreign affiliates in Republic of Srpska: industry level analysis


Siniša Kurteš, PhD*; Srđan Amidžić,PhD**; Drago Kurušić***

*PhD Full Professor, University of Banja Luka, The Faculty of Economics, Department for Economic Theory, Analysis and Policy, Department for Economic Theory, Analysis and Policy

**PhD Full Professor, University of Banja Luka, The Faculty of Economics, Department for Economic Theory

***Elite Fair d.o.o. Banja Luka



Emphasizing the importance of foreign direct investments (FDI) for the economic performance of host countries has been elaborated to a great extent in the literature. A large number of studies show positive correlations between the movement of foreign direct investments and economic growth, but also the growth of productivity, employment and exports. The business of foreign companies in the host country is monitored through Foreign Affiliates Trade Statistics, which records all important indicators of the business of foreign affiliates. The subject of this paper is to examine the total factor productivity (English: Total Factor Productivity – TFP) of foreign subsidiaries in the Republic of Srpska and various sectors of the economy of the Republic of Srpska. The research covers the period from 2014 to 2020, and for calculating TFP we will use the Malmquist Productivity Index (MPI), which is defined for measuring TFP. The results of the research show, based on the measurement of the geometric mean as a measure that observes the annual growth of the TFP index in foreign subsidiaries and sectors throughout the relevant period, that the growth of total productivity in foreign subsidiaries is lower compared to the sectoral growth of productivity. TFP growth during the observed period in foreign subsidiaries amounted to an average of 2.1%, while at the level of the economy it was 4.1%. However, productivity growth in industry and construction is higher in foreign subsidiaries compared to the sectoral average in the Republic of Srpska. Thus, the average annual productivity of foreign subsidiaries in the industry sector was 8.4%, while the annual average in the industrial sector was 6.1%. In the construction sector, the average annual productivity growth of foreign subsidiaries was 14.2%, which is significantly higher than the 6.8% average annual growth in the construction sector. From the observed results, we can conclude that there are no significant differences in productivity growth in foreign subsidiaries in relation to total productivity in the Republic of Srpska. However, from the aspect of turnover share, number of employees and added value, foreign subsidiaries are significant for the economy of Republika Srpska
Keywords: foreign direct investment, productivity, total factor productivity, foreign affiliations

DOI: 10.7251/FIN2301023K

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