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Firm size and efficiency in the German mechanical engineering industry

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  • Alexander Schiersch

Abstract

Research usually finds a positive size-efficiency relationship, but few studies focus on sectors dominated by small and medium-sized firms (SMEs). This paper fills this gap by analyzing this relationship in the German mechanical engineering industry sector, which is both successful and increasingly dominated by SMEs. The analysis, using a large and representative dataset, finds that small and large firms are, on average, the most efficient ones, while medium-sized firms have, on average, the greatest inefficiencies. Thus, the size-efficiency relationship is U-shaped rather than monotonically increasing. Additionally, the analysis finds that companies with active owner(s) are significantly more efficient and that capital firms are less efficient than firms with personally liable owners. Being located in either East or West Germany has no effect. Copyright Springer Science+Business Media, LLC. 2013

Suggested Citation

  • Alexander Schiersch, 2013. "Firm size and efficiency in the German mechanical engineering industry," Small Business Economics, Springer, vol. 40(2), pages 335-350, February.
    • Handle: RePEc:kap:sbusec:v:40:y:2013:i:2:p:335-350
    DOI: 10.1007/s11187-012-9438-8
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    Cited by:

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    2. Ahmad Hosseinzadeh & Russell Smyth & Abbas Valadkhani & Amir Moradi, 2018. "What determines the efficiency of Australian mining companies?," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 62(1), pages 121-138, January.
    3. Roberto Balado-Naves & Marian Garcia-Valiñas & David Roibas, 2023. "Efficiency, perceived prices, and household water demand: A stochastic frontier analysis for the Spanish city of Gijón," Efficiency Series Papers 2023/01, University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG).
    4. Fritsch, Michael & Changoluisa, Javier, 2017. "New business formation and the productivity of manufacturing incumbents: Effects and mechanisms," Journal of Business Venturing, Elsevier, vol. 32(3), pages 237-259.
    5. Ku-Hsieh Chen & Pei-Hwa Chen & Julie Ann Elston & Yingchao Zhang, 2023. "Are family firms more efficient? Revisiting the U-shaped curve of scale and efficiency," Small Business Economics, Springer, vol. 61(3), pages 983-1008, October.
    6. Li-Ting Yeh, 2017. "Incorporating Workplace Injury to Measure the Safety Performance of Industrial Sectors in Taiwan," Sustainability, MDPI, vol. 9(12), pages 1-14, December.
    7. Roberto Balado-Naves & Marian Garcia-Valiñas & David Roibas, 2023. "Efficiency, perceived prices, and household water demand: A stochastic frontier analysis for the Spanish city of Gijón," Working Papers hal-04147781, HAL.
    8. Agnese Rapposelli & Giuliana Birindelli & Michele Modina, 2024. "The relationship between firm size and efficiency: why does default on bank loans matter?," Quality & Quantity: International Journal of Methodology, Springer, vol. 58(4), pages 3379-3401, August.

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    More about this item

    Keywords

    Efficiency; DEA; Mechanical engineering firms; Germany; C14; L25; L60; L26;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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