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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)

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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Bibliographic 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

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Postal: CISEG (Centre for Innovation Systems, Entrepreneurship and Growth), Jönköping International Business School, P.O. Box 1026, SE-551 11 Jönköping, Sweden
Phone: 036-157700
Fax: 036-165069
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;

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Cited by:
  1. 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.
  2. Chang, Chia-Lin & Robin, Stéphane, 2010. "Knowledge sourcing and firm performance in an industrializing economy: The case of Taiwan (1992-2003)," MPRA Paper 27913, University Library of Munich, Germany.

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