What Determines the Technical Efficiency of a Firm? The Importance of Industry, Location, and Size
AbstractThis paper investigates the factors that explain the level of technical efficiency of a firm. In our empirical analysis, we use a unique sample of about 35,000 firms in 256 industries from the German Cost Structure Census over the years 1992-2004. We estimate the technical efficiency of the firms and relate it to firm- and industry-specific characteristics. One third of the explanatory power is due to industry effects. Size accounts for another 25 percent and the headquarters? location explains ten percent of the variation in efficiency. Most other firm characteristics such as ownership structure, legal form, age of the firm and outsourcing activities have an extremely small explanatory power. R&D activity does not exert any positive influence on technical efficiency.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultät in its series Jenaer Schriften zur Wirtschaftswissenschaft with number 33/2006.
Date of creation: 06 Nov 2006
Date of revision:
Postal: If a paper is not downloadable, please contact the author(s) or the library of University of Jena, not the archive maintainer.
Find related papers by JEL classification:
- 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-2006-11-25 (All new papers)
- NEP-BEC-2006-11-25 (Business Economics)
- NEP-EFF-2006-11-25 (Efficiency & Productivity)
- NEP-INO-2006-11-25 (Innovation)
- NEP-URE-2006-11-25 (Urban & Real Estate Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Patricia Beeson & Stephen Husted, 1986. "Patterns and determinants of inefficiency in state manufacturing," Working Paper 8603, Federal Reserve Bank of Cleveland.
- Fritsch, Michael & Stephan, Andreas, 2004.
"What causes cross-industry differences of technical efficiency? An empirical investigation,"
Freiberg Working Papers
2004,13, TU Bergakademie Freiberg, Faculty of Economics and Business Administration.
- Michael Fritsch & Andreas Stephan, 2004. "What Causes Cross-Industry Differences of Technical Efficiency?: An Empirical Investigation," Discussion Papers of DIW Berlin 457, DIW Berlin, German Institute for Economic Research.
- Andrei Shleifer, 1998.
"State Versus Private Ownership,"
NBER Working Papers
6665, National Bureau of Economic Research, Inc.
- Andrei Shleifer, 1998. "State Versus Private Ownership," Harvard Institute of Economic Research Working Papers 1841, Harvard - Institute of Economic Research.
- Deirdre N. McCloskey & Stephen T. Ziliak, 1996. "The Standard Error of Regressions," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 97-114, March.
- Michael Funke & Jörg Rahn, 2000.
"How Efficient is the East German Economy? An Exploration With Micro Data,"
Quantitative Macroeconomics Working Papers
20012, Hamburg University, Department of Economics.
- Michael Funke & Jörg Rahn, 2002. "How efficient is the East German economy? An exploration with microdata," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 10(1), pages 201-223, March.
- Michael Funke & Jörg Rahn, 2000. "How Efficient is the East German Economy? An Exploration With Micro Data," CESifo Working Paper Series 397, CESifo Group Munich.
- Aghion, P. & Howitt, P., 1989.
"A Model Of Growth Through Creative Destruction,"
527, Massachusetts Institute of Technology (MIT), Department of Economics.
- Aghion, P. & Howitt, P., 1989. "A Model Of Growth Through Creative Destruction," UWO Department of Economics Working Papers 8904, University of Western Ontario, Department of Economics.
- Aghion, P. & Howitt, P., 1990. "A Model Of Growth Through Creative Destruction," DELTA Working Papers 90-12, DELTA (Ecole normale supérieure).
- Philippe Aghion & Peter Howitt, 1990. "A Model of Growth Through Creative Destruction," NBER Working Papers 3223, National Bureau of Economic Research, Inc.
- Albach, Horst, 1980. "Average and Best-Practice Production Functions in German Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 29(1), pages 55-70, September.
- Meeusen, Wim & van den Broeck, Julien, 1977. "Efficiency Estimation from Cobb-Douglas Production Functions with Composed Error," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(2), pages 435-44, June.
- Helpman, E., 1991.
"Endogenous Macroeconomic Growth Theory,"
Harvard Institute of Economic Research Working Papers
1570, Harvard - Institute of Economic Research.
- Cubbin, John & Geroski, Paul A, 1987. "The Convergence of Profits in the Long Run: Inter-firm and Inter-industry Comparisons," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 427-42, June.
- Schmalensee, Richard., 1984.
"Do markets differ much?,"
1531-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Greene, William, 2005. "Reconsidering heterogeneity in panel data estimators of the stochastic frontier model," Journal of Econometrics, Elsevier, vol. 126(2), pages 269-303, June.
- Grossman, G.M. & Helpman, E., 1989.
"Quality Ledders In The Theory Of Growth,"
148, Princeton, Woodrow Wilson School - Public and International Affairs.
- Alvarez, Roberto & Crespi, Gustavo, 2003. " Determinants of Technical Efficiency in Small Firms," Small Business Economics, Springer, vol. 20(3), pages 233-44, May.
- Dirk Czarnitzki, 2005. "The Extent and Evolution of Productivity Deficiency in Eastern Germany," Journal of Productivity Analysis, Springer, vol. 24(2), pages 211-231, October.
- Caves, Richard E., 1989. "International differences in industrial organization," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 21, pages 1225-1250 Elsevier.
- Anna Bottasso & Alessandro Sembenelli, 2004. "Does ownership affect firms’ efficiency? Panel data evidence on Italy," Empirical Economics, Springer, vol. 29(4), pages 769-786, December.
- Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
- Schmidt, Peter & Sickles, Robin C, 1984. "Production Frontiers and Panel Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 2(4), pages 367-74, October.
- Heshmati, Almas, 2000.
"Productivity Growth, Efficiency and Outsourcing in Manufacturing and Service Industries,"
Working Paper Series in Economics and Finance
394, Stockholm School of Economics, revised 18 Oct 2001.
- Almas Heshmati, 2003. "Productivity Growth, Efficiency and Outsourcing in Manufacturing and Service Industries," Journal of Economic Surveys, Wiley Blackwell, vol. 17(1), pages 79-112, February.
- Schmidt, Peter & Lin, Tsai-Fen, 1984. "Simple tests of alternative specifications in stochastic frontier models," Journal of Econometrics, Elsevier, vol. 24(3), pages 349-361, March.
- L. Wade, 1988. "Review," Public Choice, Springer, vol. 58(1), pages 99-100, July.
- Hay, Donald A & Liu, Guy S, 1997. "The Efficiency of Firms: What Difference Does Competition Make?," Economic Journal, Royal Economic Society, vol. 107(442), pages 597-617, May.
- Frank Siebern, 2000. "Growth and Convergence in a Two-Region Model of Unified Germany," German Economic Review, Verein für Socialpolitik, vol. 1(3), pages 363-384, 08.
- Sickles, Robin C., 2005. "Panel estimators and the identification of firm-specific efficiency levels in parametric, semiparametric and nonparametric settings," Journal of Econometrics, Elsevier, vol. 126(2), pages 305-334, June.
- Michael Funke & Holge Strulik, 1999. "Growth and Convergence in a Two-Region Model of Unified Germany," CESifo Working Paper Series 206, CESifo Group Munich.
- Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
- Rajesh Raj, Seethamma Natarajan, 2007. "Technical Efficiency in the Informal Manufacturing Enterprises: Firm level evidence from an Indian state," MPRA Paper 7816, University Library of Munich, Germany.
- Elina Berghäll, 2008. "Revealing Agglomeration Economies with Stochastic Frontier Modelling in the Finnish ICT Industry," Discussion Papers 435, Government Institute for Economic Research Finland (VATT).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.