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Are Small Firms More Dependent on the Local Environment than Larger Firms? Evidence from Portuguese Manufacturing Firms

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  • Carlos Carreira

    ()
    (Faculty of Economics University of Coimbra and GEMF)

  • Luís Peres Lopes

    ()
    (Faculty of Economics University of Coimbra and GEMF)

Abstract

This paper analyses the impact on firm-level total factor productivity of both agglomeration economies and regional knowledge, using an unbalanced panel of Portuguese manufacturing firms covering the period 1996–2004. Controlling for the endogeneity problem using the Arellano and Bond (1991) difference GMM estimator, we found that both localization and urbanization economies have a significant and positive effect on firms’ TFP, with the latter playing the most important role. Sectoral specialization economies are important for small and medium firms, but not for large firms. However, larger firms profit more from regional knowledge than smaller ones.

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Bibliographic Info

Paper provided by GEMF - Faculdade de Economia, Universidade de Coimbra in its series GEMF Working Papers with number 2012-21.

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Length: 30 pages
Date of creation: Dec 2012
Date of revision:
Handle: RePEc:gmf:wpaper:2012-21

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Keywords: agglomeration economies; regional knowledge; total factor productivity; small firms.;

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