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Do innovation and human capital explain the productivity gap between small and large firms?

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Author Info
Laia Castany () (Faculty of Economics, University of Barcelona)
Enrique Lopez-Bazo () (Faculty of Economics, University of Barcelona)
Rosina Moreno () (Faculty of Economics, University of Barcelona)

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Abstract

Empirical evidence is compelling that large firms are more productive than small firms. The hypothesis in this paper is that the productivity differences between small and large firms are associated with two of the main determinants of a firm’s performance: the human and technological capital that firms incorporate. We suggest that the contribution of these factors in explaining the size of the productivity gap might not only be due to the fact that large firms make a more extensive use of them, but also because large firms obtain higher returns from their investment in human and technological capital. The evidence we obtain for a comprehensive sample of Spanish manufacturing firms (1990-2002) supports this hypothesis, which has important implications for the effectiveness of policies designed to improve productivity in SMEs by stimulating innovation and the use of more skilled workers.

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File URL: http://www.ub.edu/irea/working_papers/2007/200716.pdf
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Publisher Info
Paper provided by University of Barcelona, Research Institute of Applied Economics in its series IREA Working Papers with number 200716.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 25 pages
Date of creation: Nov 2007
Date of revision: Nov 2007
Handle: RePEc:ira:wpaper:200716

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Postal: Tinent Coronel Valenzuela, Num 1-11 08034 Barcelona
Web page: http://www.ub.edu/irea/
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Related research
Keywords: total factor productivity; innovation; skilled labour; firm size.;

Find related papers by JEL classification:
D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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    Other versions:
  3. Ornaghi, Carmine, 2006. "Spillovers in product and process innovation: Evidence from manufacturing firms," International Journal of Industrial Organization, Elsevier, vol. 24(2), pages 349-380, March. [Downloadable!] (restricted)
  4. Delgado, Miguel A. & Farinas, Jose C. & Ruano, Sonia, 2002. "Firm productivity and export markets: a non-parametric approach," Journal of International Economics, Elsevier, vol. 57(2), pages 397-422, August. [Downloadable!] (restricted)
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  7. John C. Haltiwanger & Julia I. Lane & James R. Spletzer, 1999. "Productivity Differences across Employers: The Roles of Employer Size, Age, and Human Capital," American Economic Review, American Economic Association, vol. 89(2), pages 94-98, May. [Downloadable!] (restricted)
  8. Zabojnik, Jan & Bernhardt, Dan, 2001. "Corporate Tournaments, Human Capital Acquisition, and the Firm Size-Wage Relation," Review of Economic Studies, Blackwell Publishing, vol. 68(3), pages 693-716, July.
  9. Cohen, Wesley M & Klepper, Steven, 1996. "Firm Size and the Nature of Innovation within Industries: The Case of Process and Product R&D," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 232-43, May. [Downloadable!] (restricted)
  10. Audretsch, David B, 2002. " The Dynamic Role of Small Firms: Evidence from the U.S," Small Business Economics, Springer, vol. 18(1-3), pages 13-40, Feb.- May. [Downloadable!] (restricted)
  11. Omar LICANDRO & Reyes MAROTO & Luis A. PUCH, 2004. "Innovation, investment and productivity: evidence from Spanish firms," Economics Working Papers ECO2004/07, European University Institute. [Downloadable!]
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  12. Huergo, Elena & Jaumandreu, Jordi, 2004. "Firms' age, process innovation and productivity growth," International Journal of Industrial Organization, Elsevier, vol. 22(4), pages 541-559, April. [Downloadable!] (restricted)
  13. Zvi Griliches, 1979. "Issues in Assessing the Contribution of Research and Development to Productivity Growth," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 92-116, Spring. [Downloadable!] (restricted)
    Other versions:
  14. Elena Huergo & Jordi Jaumandreu, 2004. "How Does Probability of Innovation Change with Firm Age?," Small Business Economics, Springer, vol. 22(3_4), pages 193-207, 04. [Downloadable!]
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