Technical Change, Efficiency, Firm Size and Age in an R&D Intensive Sector
AbstractThe relationship between firm size and age relative to technical change and efficiency is examined in a highly innovative and dynamic sector, the Finnish ICT equipment manufacturing industry. A stochastic frontier model is applied to an unbalanced firm level panel over the period 1990?2003. The sample is representative of almost half of corporate R&D in Finland. The Method of Moments and Battese-Coelli efficiency measures are obtained to compare permanent and time-varying efficiency levels. Results show firm age to be relatively insignificant. New firms do not dominate technical change. In contrast, firm size makes a substantial contribution to productivity growth, technical change and efficiency. High elasticity of factor inputs result in, on average, highly increasing returns to scale. These factors point towards growing concentration and capital-intensity, which can be expected to further widen the productivity gap between small and large firms. To survive, smaller firms may need to combine frontier technology adoption with expanding scale, e.g., by mergers, to improve both technical and scale efficiency.
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Bibliographic InfoPaper provided by Government Institute for Economic Research Finland (VATT) in its series Discussion Papers with number 390.
Date of creation: 04 May 2006
Date of revision:
Find related papers by JEL classification:
- O39 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Other
- L63 - Industrial Organization - - Industry Studies: Manufacturing - - - Microelectronics; Computers; Communications Equipment
- O30 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-07-09 (All new papers)
- NEP-CSE-2006-07-09 (Economics of Strategic Management)
- NEP-EFF-2006-07-09 (Efficiency & Productivity)
- NEP-ENT-2006-07-09 (Entrepreneurship)
- NEP-INO-2006-07-09 (Innovation)
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