Competition, ownership and productivity. A panel analysis of Czech firms

•Our study is empirical based on a panel data set of Czech firms.•The effective ownership structure depends upon the level of tariffs.•Low tariffs: increase in competition is good for firms with strong ownership.•High tariffs: increase in competition is good for firms with weak ownership.•Our results encompass to some extent previous results in the literature.

Theoretical results support two concurrent views regarding the mediating role that ownership structure might play on the effect of competition on firm performance. According to one stream of literature, competition has a high, positive impact in companies that have an effective ownership structure. On the contrary, inferences based on the x-inefficiency literature suggest the highest positive effect will be experienced by companies with inappropriate ownership structure. Our empirical analysis on a panel of Czech firms shows that the former view is supported if import competition is high; otherwise, the latter view holds. Our results also indicate that the effective ownership structure is highly concentrated ownership if tariffs are low, and dispersed ownership otherwise. In terms of policy implications we therefore conclude that trade liberalization might need to be accompanied by reforms that encourage certain ownership structures. Our paper encompasses to some extent previous empirical results in the literature.