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Are large innovative firms more efficient?

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  • Sánchez, Rosario/R
  • Diaz, M. Angeles

Abstract

One of the characteristics of the Spanish economy is the high percentage of small and medium-sized firms. Size is one of the factors that condition the managerial organization of the firms and their efficiency and productivity. Moreover size has been found a highly significant variable in explaining differences in firm’s innovative activities and the returns of R&D expenditures, and it is a well-established connection between productivity and innovative activities. This paper analyses the relationship between innovative activities and size and their effect over firms’ technical efficiency and then over their productivity. We also take into account other variables that could affect the relationship between productivity and innovative activities: industrial sector, market structure, or firms’ financial conditions. The analysis could help to design political economic measures to encourage small firms’ innovation and then contribute to improve their competitiveness. We use a micro panel data set of Spanish manufacturing firms, during the period 2004–2009, to simultaneously estimate a stochastic frontier production function and the inefficiency determinants. The data source is published in the Spanish Industrial Survey on Business Strategies (Encuesta sobre Estrategias Empresariales, ESEE), collected by the Fundación SEPI. Our preliminary results show that innovative firms are more efficient than non-innovative firms; and that small and medium-sized firms’ tent to be more efficient than large firms are.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 44592.

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Date of creation: 25 Feb 2013
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Handle: RePEc:pra:mprapa:44592

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Keywords: small firms; technical efficiency; innovative activities.;

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  1. Patibandla, Murali, 1998. "Structure, organizational behavior, and technical efficiency: The case of an Indian industry," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 34(3), pages 419-434, March.
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  3. P. Geroski, 1998. "An Applied Econometrician's View of Large Company Performance," Review of Industrial Organization, Springer, Springer, vol. 13(3), pages 271-294, June.
  4. Kumbhakar, Subal C. & Ortega-Argilés, Raquel & Potters, Lesley & Vivarelli, Marco & Voigt, Peter, 2009. "Corporate R&D and Firm Efficiency: Evidence from Europe’s Top R&D Investors," IZA Discussion Papers 4657, Institute for the Study of Labor (IZA).
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  6. Hall, Bronwyn H. & Mairesse, Jacques, 1995. "Exploring the relationship between R&D and productivity in French manufacturing firms," Journal of Econometrics, Elsevier, Elsevier, vol. 65(1), pages 263-293, January.
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  10. Carmine Ornaghi, 2002. "Spillovers In Product And Process Innovation: Evidence From Manufacturing Firms," Economics Working Papers we023213, Universidad Carlos III, Departamento de Economía.
  11. M. Diaz & Rosario Sanchez, 2008. "Firm size and productivity in Spain: a stochastic frontier analysis," Small Business Economics, Springer, Springer, vol. 30(3), pages 315-323, March.
  12. Jondrow, James & Knox Lovell, C. A. & Materov, Ivan S. & Schmidt, Peter, 1982. "On the estimation of technical inefficiency in the stochastic frontier production function model," Journal of Econometrics, Elsevier, Elsevier, vol. 19(2-3), pages 233-238, August.
  13. Elena Huergo & Jordi Jaumandreu, 2004. "How Does Probability of Innovation Change with Firm Age?," Small Business Economics, Springer, Springer, vol. 22(3_4), pages 193-207, 04.
  14. Klepper, Steven, 1996. "Entry, Exit, Growth, and Innovation over the Product Life Cycle," American Economic Review, American Economic Association, American Economic Association, vol. 86(3), pages 562-83, June.
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  16. repec:fth:inseep:9833 is not listed on IDEAS
  17. Huergo, Elena & Jaumandreu, Jordi, 2004. "Firms' age, process innovation and productivity growth," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 22(4), pages 541-559, April.
  18. Richard E. Caves, 1992. "Industrial Efficiency in Six Nations," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262031930, December.
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