Effects of fixed capital investments on technical efficiency in food industry
Are firms that make investments in fixed assets more efficient? Can fixed capital investments contribute to the improvement of a firm’s production technologies? In this paper we estimate the stochastic production frontier using firm-level data for food industry in 2003–2010, taking into account a possible relationship between fixed capital investments technical efficiency. We use the «Ruslana» (Bureau van Dijk) database, which contains financial information on companies in Russia. Our results show that in food industry technical efficiency is higher for larger firms which invested in fixed assets in the previous period. Technical efficiency has been gradually decreasing after the 2008 crisis, with small and average-sized firms affected most negatively.
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