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Labor productivity of small and large manufacturing firms: the case of Taiwan

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  • M. Hsu
  • B‐L. Chen

Abstract

This work studies the factors influencing the labor productivity of small and medium‐sized enterprises (SMEs) and large firms using Taiwan as a case study. A special emphasis is placed on two possible international channels: exports and foreign direct investment (FDI). Different from conventional studies, we employ the two‐stage switching regressions to correct the firm‐size effect on labor productivity and estimate labor productivity for SMEs and large firms. The main findings are as follows. First, the estimates of the selectivity variable are statistically significant for both SMEs and large firms, supporting the hypothesis of correcting the effect of firm‐size truncation. Second, while a larger trade intensity significantly increases the labor productivity of SMEs, it deteriorates significantly that of large firms. Third, FDI enhances the labor productivity of SMEs internally, whereas it has a negative spillover on that of other small and large firms in the industry. While the first outcome lends supports to the role of self‐selection, the remaining stands in sharp contrast to conventional wisdom.

Suggested Citation

  • M. Hsu & B‐L. Chen, 2000. "Labor productivity of small and large manufacturing firms: the case of Taiwan," Contemporary Economic Policy, Western Economic Association International, vol. 18(3), pages 270-283, July.
    • Handle: RePEc:bla:coecpo:v:18:y:2000:i:3:p:270-283
    DOI: 10.1111/j.1465-7287.2000.tb00024.x
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    2. Zulfiqar, Salyha, 2012. "Analyzing the Input Output Relationship of Small and Medium Enterprises in Pakistan: An Econometric Approach," MPRA Paper 50069, University Library of Munich, Germany.
    3. Hessels, Jolanda & Parker, Simon C., 2013. "Constraints, internationalization and growth: A cross-country analysis of European SMEs," Journal of World Business, Elsevier, vol. 48(1), pages 137-148.
    4. Sakiru Solarin, 2016. "Sources of labour productivity: a panel investigation of the role of military expenditure," Quality & Quantity: International Journal of Methodology, Springer, vol. 50(2), pages 849-865, March.
    5. Meng‐Chi Tang & Yih‐Luan Chyi, 2008. "Legal Environments, Venture Capital, And Total Factor Productivity Growth Of Taiwanese Industry," Contemporary Economic Policy, Western Economic Association International, vol. 26(3), pages 468-481, July.
    6. Chengqi Wang & Li Yu, 2007. "Do spillover benefits grow with rising foreign direct investment? An empirical examination of the case of China," Applied Economics, Taylor & Francis Journals, vol. 39(3), pages 397-405.
    7. Yismaw Ayelign & Lakhwinder Singh, 2019. "Labor productivity of Ethiopian large and Medium Scale Manufacturing Sector," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 5(3), pages 64-70, September.
    8. Mohammad Abir Shahid Chowdhury & Shuai Chuanmin & Marcela Sokolová & ABM Munibur Rahman & Ahsan Akbar & Zahid Ali & Muhammad Usman, 2021. "Unveiling the Nexus between Access to Electricity, Firm Size and SME’s Performance in Bangladesh: New Evidence Using PSM," Energies, MDPI, vol. 14(20), pages 1-16, October.
    9. Pedro Sánchez-Sellero & Jorge Rosell-Martínez & José Manuel García-Vázquez, 2014. "Spillovers from Foreign Direct Investment in Spanish Manufacturing Firms," Review of International Economics, Wiley Blackwell, vol. 22(2), pages 342-351, May.
    10. Wang, Chengqi & Kafouros, Mario I., 2009. "What factors determine innovation performance in emerging economies? Evidence from China," International Business Review, Elsevier, vol. 18(6), pages 606-616, December.

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