Productivity and resource allocation of Russian companies: Analysis of trends and interrelationships

The issue of resource misallocation is becoming more closely linked to the persistent gaps in total factor productivity (TFP) and the decline in its growth. At the micro level, we examine the tendencies of misallocation and its relationship with TFP by using a wide range of Russian companies. TFP dispersion has increased by 8.9%, indicating that the misallocation in Russia is deteriorating from 2012 to 2022. The TFP gap between large and small companies is the primary factor, accounting for up to 63% of intra-industry misallocation. Furthermore, the variance in TFP is attributable to leverage, asset profitability, liquidity, and foreign ownership, all of which have a positive impact on its level, as well as age, which has a negative impact. The impact of state participation varies across industries. Insufficient exit of low-performing companies and the absence of new companies with a higher level of TFP than the existing ones exacerbate the misallocation. The evaluation of the VARX model has revealed a lack of priority in attracting investments in the most rapidly expanding technology companies and disproportionate capital transfers in favor of large companies, which is an additional source of misallocation. The findings support the necessity of a long-term national state program to monitor and enhance the TFP of companies, as well as the utilization of this indicator to evaluate the efficacy of the company’s management and make investment and financial decisions.