What Drives the Productive Efficiency of a Firm? The Importance of Industry,Location, R&D, and Size
AbstractThis paper investigates the factors that explain the level and dynamics of productive efficiency of a manufacturing firm. In our empirical analysis, we use a unique sample of about 39,000 firms in 256 industries from the German Cost Structure Census over the years 1992–2005. We estimate the efficiencies of the firms and relate them to firm-specific and environmental factors. We find that (1) about half of the model’s explanatory power is due to industry effects, (2) that firm size accounts for another twenty percent, and (3) that the headquarters’ location explains approximately fifteen percent. Interestingly, most other firm characteristics such as R&D intensity, outsourcing activities or the number of owners have an extremely small explanatory power. Surprisingly, our findings suggest that higher R&D intensity is associated with being less efficient, though higher R&D spending increases a firm’s efficiency over time.
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Bibliographic InfoPaper provided by Centre for Innovation Systems, Entrepreneurship and Growth, Jönköping International Business School in its series CISEG Working Papers Series with number 4.
Length: 32 pages
Date of creation: 25 Mar 2008
Date of revision:
Contact details of provider:
Postal: CISEG (Centre for Innovation Systems, Entrepreneurship and Growth), Jönköping International Business School, P.O. Box 1026, SE-551 11 Jönköping, Sweden
Web page: http://www.ihh.hj.se/eng/
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Frontier analysis; determinants of efficiency; firm performance; industry effects; regional effects; firm size;
Other versions of this item:
- Badunenko, Oleg & Fritsch, Michael & Stephan, Andreas, 2008. "What Drives the Productive Efficiency of a Firm? - the importance of industry, location, R&D, and size," Working Paper Series in Economics and Institutions of Innovation 126, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
- Oleg Badunenko & Michael Fritsch & Andreas Stephan, 2008. "What Drives the Productive Efficiency of a Firm?: The Importance of Industry, Location, R&D, and Size," Discussion Papers of DIW Berlin 775, DIW Berlin, German Institute for Economic Research.
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
- L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-12-14 (All new papers)
- NEP-BEC-2008-12-14 (Business Economics)
- NEP-CSE-2008-12-14 (Economics of Strategic Management)
- NEP-EFF-2008-12-14 (Efficiency & Productivity)
- NEP-GEO-2008-12-14 (Economic Geography)
- NEP-MIC-2008-12-14 (Microeconomics)
- NEP-TID-2008-12-14 (Technology & Industrial Dynamics)
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- Andreas Stephan, 2011. "Locational conditions and firm performance: introduction to the special issue," The Annals of Regional Science, Springer, vol. 46(3), pages 487-494, June.
- Chang, Chia-Lin & Robin, Stéphane, 2010.
"Knowledge sourcing and firm performance in an industrializing economy: The case of Taiwan (1992-2003),"
27913, University Library of Munich, Germany.
- Chia-Lin Chang & Stéphane Robin, 2012. "Knowledge sourcing and firm performance in an industrializing economy: the case of Taiwan (1992–2003)," Empirical Economics, Springer, vol. 42(3), pages 947-986, June.
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