PUBLICATIONS & REPORTS

Contents Introduction

This paper investigates the productivity differentials between foreign and local plants in the Thai automobile industry, using the plant-level data underlying the 1997 industrial census (1996 data) and the 1999 industrial survey (1998 data) collected by the National Statistical Office of Thailand. According to the traditional theory of multinational corporations (MNCs), foreign-affiliated plants are expected to have higher productivity than local plants because MNCs have several ownership-specific advantages, including superior production technology and managerial resources. The results suggest that the labor productivity of foreign-affiliated plants is higher than that of local plants, as expected. However, most of the difference in higher labor productivity can be explained by higher capital intensity in foreign plants, not ownership-specific advantages. Comparisons of total factor productivity (TFP) levels in foreign and local plants again reveal no evidence that foreign plants have relatively high TFP that can be related to their ownership-specific advantages. Moreover, foreign plants in the motor vehicle bodies and trailers and the motor vehicle parts and accessories industries tend to have lower capital productivity than local plants in these industries, though foreign plants in the motor vehicle assembly industry have the relatively high labor productivity, capital productivity, and TFP. The paper thus concludes that the small size of the Thai automobile market prevents both the foreign and the local plants from exploiting scale economies.