Abstract
AbstractThis paper examines the relation between productivity and specialisation of firms in business functions. We distinguish between specialisation in R&D, fabrication and marketing based on the firm's employment composition over these functions using unique survey data of Dutch firms. Our results suggest that firms specialised in R&D and marketing are significantly more productive compared to firms specialised in fabrication. We find that measures of upstreamness based on input–output tables do not significantly relate to firm productivity and are uncorrelated to measures of functional specialisation.
Highlights
A defining characteristic of our modern economy is the fragmentation of production across national borders (Amador & Cabral, 2017; Baldwin, 2016)
We find that firms specialised in R&D and marketing have significantly higher productivity levels compared to firms that specialise in fabrication
This section examines the relation between functional specialisation, measures of upstreamness, productivity and mark-ups
Summary
A defining characteristic of our modern economy is the fragmentation of production across national borders (Amador & Cabral, 2017; Baldwin, 2016). These provide measures of the relative production line position and inform whether the products that firms produce are either closer or further away from final consumption. Total factor productivity accounts for capital inputs and is estimated econometrically using the approach suggested by Wooldridge (2009), with a price mark-up correction from De Loecker and Warzynski (2012), see Section 3. There appears no relation between the upstreamness value Uk and the specialisation of firms in R&D, fabrication and marketing.11 This provides suggestive evidence that input–output-based measures of upstreamness do not relate to what firms do, which is tested more formally There appears no relation between the upstreamness value Uk and the specialisation of firms in R&D, fabrication and marketing. This provides suggestive evidence that input–output-based measures of upstreamness do not relate to what firms do, which is tested more formally
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