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What Drives the Productive Efficiency of a Firm? The Importance of Industry,Location, R&D, and Size

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Author Info
Stephan, Andreas () (Jönköping International Business School)
Badunenko, Oleg () (German Institute for Economic Research, DIW Berlin)
Fritsch, Michael () (Friedrich Schiller University Jena)

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Abstract

This 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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Publisher Info
Paper provided by Centre for Innovation Systems, Entrepreneurship and Growth, Jönköping International Business School in its series CISEG Working Papers Series with number 4.

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Length: 32 pages
Date of creation: 25 Mar 2008
Date of revision:
Handle: RePEc:hhs:hjiseg:0004

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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Related research
Keywords: Frontier analysis; determinants of efficiency; firm performance; industry effects; regional effects; firm size;

Other versions of this item:

Find related papers by JEL classification:
D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity
L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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