Due to ownership advantages, the performances of foreign firms are generally better than local firms in the host market. However, this study empirically finds that foreign firms in Taiwan’s electronics components industry achieved relatively lower productivity efficiencies during 1986-1996, when Taiwan’s economy was liberalized. Putting extra efforts into improving their own technical efficiency, local firms gained higher technical efficiencies and TFP growth, leading to the conclusion that there was a trend towards a narrowing of the productivity gap between local firms and foreign firms.
