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Are large innovative firms more efficient?

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

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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  1. Hall, Bronwyn H. & Mairesse, Jacques, 1995. "Exploring the relationship between R&D and productivity in French manufacturing firms," Journal of Econometrics, Elsevier, vol. 65(1), pages 263-293, January.
  2. Hay, Donald A & Liu, Guy S, 1997. "The Efficiency of Firms: What Difference Does Competition Make?," Economic Journal, Royal Economic Society, vol. 107(442), pages 597-617, May.
  3. Subal Kumbhakar & Raquel Ortega-Argilés & Lesley Potters & Marco Vivarelli & Peter Voigt, 2012. "Corporate R&D and firm efficiency: evidence from Europe’s top R&D investors," Journal of Productivity Analysis, Springer, vol. 37(2), pages 125-140, April.
  4. Carmine Ornaghi, 2002. "Spillovers In Product And Process Innovation: Evidence From Manufacturing Firms," Economics Working Papers we023213, Universidad Carlos III, Departamento de Economía.
  5. Bruno Crepon & Emmanuel Duguet & Jacques Mairesse, 1998. "Research, Innovation, and Productivity: An Econometric Analysis at the Firm Level," NBER Working Papers 6696, National Bureau of Economic Research, Inc.
  6. Rosario Sanchez & Maria Angeles Diaz, . "Firms' Size and Productivity in Spain: a Stochastic Frontier Analysis," EcoMod2006 272100076, EcoMod.
  7. Patibandla, Murali, 1998. "Structure, organizational behavior, and technical efficiency: The case of an Indian industry," Journal of Economic Behavior & Organization, Elsevier, vol. 34(3), pages 419-434, March.
  8. repec:fth:inseep:9833 is not listed on IDEAS
  9. Dilling-Hansen, Mogens & Madsen, Erik Strojer & Smith, Valdemar, 2003. "Efficiency, R&D and ownership - some empirical evidence," International Journal of Production Economics, Elsevier, vol. 83(1), pages 85-94, January.
  10. Elena Huergo & Jordi Jaumandreu, 2004. "How Does Probability of Innovation Change with Firm Age?," Small Business Economics, Springer, vol. 22(3_4), pages 193-207, 04.
  11. Richard E. Caves, 1992. "Industrial Efficiency in Six Nations," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262031930, June.
  12. Geroski, Paul A, 1998. "An Applied Econometrician's View of Large Company Performance," CEPR Discussion Papers 1862, C.E.P.R. Discussion Papers.
  13. Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, vol. 20(2), pages 325-32.
  14. Huergo, Elena & Jaumandreu, Jordi, 2004. "Firms' age, process innovation and productivity growth," International Journal of Industrial Organization, Elsevier, vol. 22(4), pages 541-559, April.
  15. 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, vol. 19(2-3), pages 233-238, August.
  16. Crepon, B. & Duguet, E. & Mairesse, J., 1998. "Research Investment, Innovation and Productivity: An Econometric Analysis at the Firm Level," Papiers d'Economie Mathématique et Applications 98.15, Université Panthéon-Sorbonne (Paris 1).
  17. Klepper, Steven, 1996. "Entry, Exit, Growth, and Innovation over the Product Life Cycle," American Economic Review, American Economic Association, vol. 86(3), pages 562-83, June.
  18. Ana Martin-Marcos & Cristina Suarez-Galvez, 2000. "Technical efficiency of Spanish manufacturing firms: a panel data approach," Applied Economics, Taylor & Francis Journals, vol. 32(10), pages 1249-1258.
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