What drives the productive efficiency of a firm? The importance of industry, location, R&D, and size

Arbeitspapier

This paper investigates the factors that explain the level and dynamics of manufacturing firm productive efficiency. In our empirical analysis, we use a unique sample of about 39,000 firms in 256 industries from the German Cost Structure Census over the years 1992-2005. We estimate the efficiencies of the firms and relate them to firm-specific and environmental factors. We find that (1) about half the model's explanatory power is due to industry effects, (2) firm size accounts for another 20 percent, and (3) location of headquarters explains approximately 15 percent. Interestingly, most other firm characteristics, such as R&D intensity, outsourcing activities, or the number of owners, have extremely little explanatory power. Surprisingly, our findings suggest that higher R&D intensity is associated with being less efficient, though higher R&D spending increases a firm's efficiency over time.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: DIW Discussion Papers ; No. 775

Classification and Topics

• Classification: Wirtschaft ; Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity ; Market Structure, Firm Strategy, and Market Performance: General ; Firm Performance: Size, Diversification, and Scope
• Subject: Frontier analysis ; determinants of efficiency ; firm performance ; industry effects ; regional effects ; firm size ; Verarbeitendes Gewerbe ; Produktivität ; Technische Effizienz ; Kostenstruktur ; Branche ; Standort ; Betriebsgröße ; Industrielle Forschung ; Deutschland

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Badunenko, Oleg ; Fritsch, Michael ; Stephan, Andreas
• Event: Veröffentlichung
• (who): Deutsches Institut für Wirtschaftsforschung (DIW)
• (where): Berlin
• (when): 2008

Further information

• Handle: http://hdl.handle.net/10419/27299
• Last update: 10.03.2025, 11:43 AM CET