Firm Productivity Growth Research Articles

Rethinking the import-productivity nexus for Italian manufacturing

We provide evidence on the firm level productivity effects of imports of intermediates. By exploiting a large panel of Italian manufacturing firms, we are able to separately explore the role of importing from high and low income countries. Importing does not permanently affect the firm productivity growth. This finding holds both when we test for the import entry by means of Propensity Score Matching techniques and when we analyse the import intensity within a dynamic panel data model framework. On the contrary, we confirm the existence of self-selection into importing. Also, our evidence supports the learning-by-exporting effects in Italian manufacturing and we prove that this result is robust to the control of firm import activity.

Firm Turnover and Productivity Growth in Canadian Manufacturing and Services Industries, 2000 to 2007

This paper examines the differences and similarities in the nature of the competitive process for a cross section of Canadian industries. It studies the intensity and the effectiveness of entry, the relationship between turnover within incumbents and the intensity of entry, and the failure process underlying the exit of entrants. Finally, it asks how differences in these processes relate to the contribution that turnover makes to productivity growth. Differences across industries both in the effectiveness of the entry process and the contribution of turnover to productivity growth are related to the conditions that permit entry at relatively large scale and regulatory conditions in the industry. Industries where entrants are capable of establishing a relatively large footprint are generally those where entrants capture more of the market, where there is more intense turnover among incumbents and where a larger proportion of productivity growth comes from turnover due to both entry and exit and changes in the market position of incumbents. Industries where regulation attenuates freedom of entry have a different though related profile. Even here, turnover contributes to productivity growth.

Trade and product market policies in upstream sectors and productivity in downstream sectors: Firm-level evidence from China

This paper explores the heterogeneous productivity impact of trade, product market and financial market policies over the last decade in China. The paper makes a critical distinction between downstream and upstream industries, focusing on the indirect effects of regulation in upstream industries on firm performance in downstream manufacturing industries. We identify the differential effect of these policies on firm productivity growth depending on how far incumbents are relative to the technological frontier. Trade and product market reforms are found to deliver stronger gains for firms that are closer to the industry-level technological frontier, while the reverse holds for financial market reforms. The key conclusion that can be derived from the empirical analysis is that further product, trade and financial market reforms would bring substantial gains in China and could therefore speed up the convergence process. Taken at face value, the empirical estimates would imply that aligning product, trade and financial market regulation to the average level observed in OECD countries would bring aggregate manufacturing productivity gains of respectively 9%, 3% and 6.5% after 5years.

Firm dynamics in the Cambodian garment industry: firm turnover, productivity growth and wage profile under trade liberalization

The international garment trade was liberalized in 2005 following the termination of the Multifibre Arrangement (MFA) and ever since then, price competition has intensified. Employing a unique firm dataset collected by the authors, this paper examines the changes in the performance of Cambodian garment firms between 2002/03 and 2008/09. During the period concerned, frequent firm turnover led to a growth of the industry's productivity, and the study found that the average total-factor productivity (TFP) of new entrants was substantially higher than that of exiting firms. Furthermore, we observed that, thanks to productivity growth, an improvement in workers’ welfare, including a rise in the relative wages of the low-skilled, was taking place. These industrial dynamics differ considerably from those indicated by the ‘race to the bottom’ argument as applied to labor-intensive industrialization in low-income countries.

R&D and Non-Linear Productivity Growth of Heterogeneous Firms

The present paper studies the relationship between RD (ii) the impact of RD (iii) the relationship between RD (iv) there are important intersectoral differences with respect to R&D investment and firm productivity – high-tech sectors’ firms not only invest more in R&D, but also achieve more in terms of productivity gains connected with research activities.

Corporate Taxation and Productivity Catch-Up: Evidence from European Firms

Firms that lie far behind the technological frontier have the most to gain from imitating the technology or management practices of others. That some firms converge relatively slowly to the productivity frontier suggests the existence of factors that cause them to underinvest in their productivity. In this paper we explore how far higher rates of corporate taxation affect firm productivity convergence by reducing the after tax returns to productivity enhancing investments for small firms. Using data for 11 European countries we find evidence for such an effect; productivity growth in small firms is slower the higher are corporate tax rates. Our results are robust to the use of instrumental variable and panel data techniques with quantitatively similar effects found from a natural experiment following the German tax reforms in 2001.

The Impact of Bribery on Firm Performance: Evidence from Central and Eastern European Countries

I examine the relation between bureaucratic corruption ('to get things done') and firm performance in Central and Eastern European countries. While previous research relies on data from the BEEPS survey, which suffers from excessive non-reporting of corporate performance, I combine the information on bribery practices from the BEEPS with reliable firm performance data from the Amadeus database. The estimates, identified from within-firm variation, suggest that bureaucratic corruption negatively affects both the sales and labor productivity growth of firms. However, conditional on a given level of bribery in a narrowly defined local market, a higher dispersion of firms' bribing behavior within such a market appears to facilitate firm performance. I provide an explanation for this finding and also investigate the effect of bribery with respect to the heterogeneity of firms in terms of their size, inclusion in the manufacturing or service sector, stability, and countries' overall institutional environments.

The impact of venture capital on the productivity growth of European entrepreneurial firms: ‘Screening’ or ‘value added’ effect?

We aim to ascertain to what extent the better performance of European venture capital (VC)‐backed firms in high-tech industries is due to either ‘screening’ or ‘value added’ provided by VC investors. We compare portfolio firms' productivity growth before and after the first VC round, using a matched control group as benchmark. We show that productivity growth is not significantly different between VC and non-VC-backed firms before the first round of VC financing, whereas significant differences are found in the first years after the investment event. We also find that the value-adding services provided by VC investors ‘imprint’ the portfolio firm.

Firms' internationalization and productivity growth

From a theoretical perspective it is well stated that firms involved in international markets should exhibit higher productivity levels. There is also empirical evidence that supports this result. This paper extends this relationship to a dynamic perspective. It provides evidence on how productivity evolves in more internationalized firms distinguishing different degrees of international involvement both in qualitative as well as in quantitative terms. The results show that productivity evolves differently in those firms that are doing international business, although without differences between large exporters and multinationals.

PERTUMBUHAN PRODUKTIVITAS PERUSAHAAN MANUFAKTUR INDONESIA DAN PENANAMAN MODAL ASING: PENERAPAN METODE DEKOMPOSISI

This paper examines the productivity growth of Indonesian local firms in relation to foreign direct investment (FDI). Using the survey data of manufacturing firms in Indonesia from 1988 to 2000, the paper decomposes the productivity growth of Indonesian manufacturing firms into three important sources: technical efficiency change, technological progress, and scale efficiency change. The results show that the average total factor productivity (TFP) growth between 1988 and 2000 is 3.51, and the major source contributed to the growth come from technological progress. The interesting finding appears when the data is grouped into foreign firms and domestic firms. It is found that foreign firms have larger productivity growth compared to domestic firms, especially during the period of crisis onwards.

Measuring productivity growth, efficiency change and technical progress in small scale firms in India during pre and post-reform periods

This study examines the productivity, efficiency change and technical progress of small manufacturing firms in Coimbatore, India using Data Envelopment Analysis. Since July 1991, major economic policy changes have been made under an economic reforms programme. The new policies have relaxed or removed many government controls on production capacity, imported capital goods, intermediate inputs and technology. These reforms have altered the economic environment of the country. The results reveal that productivity and technical progress was slightly higher in the pre-reform period than in the post-reform period but technical efficiency is greater in the post-reform period.

Multi-product firms, product mix changes and upgrading: Evidence from China's state-owned forest areas

Product selection matters for a firm's productivity and long-run growth. Recent theoretical and empirical studies indicate that an important margin of adjustment to policy reforms is the reallocation of output within firms through changes in product mix decisions. This paper examines the frequency, pervasiveness and determinants of product-switching and upgrading activities in firms located in China's state-owned forest areas during a period of gradual institutional and managerial reforms (2004–2008). We find that changes to the product mix are pervasive and characterized by adding or churning products rather than only shedding products. Moreover, changes in firms’ product mix have made a significant contribution to the aggregate output growth during our sample period. We also find that firms with different characteristics, human capital and market conditions differ in their propensity to diversify and upgrade product mix.

R&D and Non-Linear Productivity Growth of Heterogeneous Firms

The present paper studies the relationship between RD (ii) the impact of RD (iii) the relationship between RD(iv) there are important inter-sectoral differences with respect to R&D investment and firm productivity - high-tech sectors' firms not only invest more in R&D, but also achieve more in terms of productivity gains connected with research activities.

India‘s Exports of Software Services

Services sector in India showed a remarkable resilience to global economic crisis and grew at a rate of 9.3 per cent explaining around 88 per cent of the growth rate in real GDP of India in 2008–09. Exportsof software services helped considerably in providing the necessary resilience. The main objective of the paper is to examine the role of external demand and productivity growth in exports of software services. Global income elasticity of demand for export of software services is estimated for the period 1970–2008. Sources of total factor productivity growth in Indian IT services firms are identified using Data Envelopment Analysis for the period 1994–95 to 2007–08. It is found that high income demand elasticity for India–s software services has contributed substantially to its growth. But more importantly, there has been a steep rise in productivity growth in the post-2000 period which is attributable mainly to technological innovation.

Firm‐level productivity and exporting in Uganda's manufacturing sector

PurposeThis paper aims to investigate firm‐level interactions between productivity and exporting in Uganda's manufacturing sector.Design/methodology/approachThe paper empirically tested two hypotheses that relate to the dynamic gains from trade and also have tended to dominate the literature; self‐selection and learning‐by‐exporting hypotheses. It employs proxies of self‐selection and learning‐by‐exporting obtained from indices of path dependence to fit maximum likelihood estimates of export behavior.FindingsThe results provide support for both hypotheses and it is also found that more experienced exporters reap more productivity gains from learning effects which is in line with the view that knowledge spillovers to exporting firms increase with the level of interaction in the global market place. Thus, learning‐by‐exporting is not a “short term” occurrence which takes place only in the first few years of entry in export markets after which it would fizzle out as a firm's exporting experience increases but rather, it is a cumulative process.Practical implicationsThis paper generates a number of insights that can guide policy makers in designing policies to promote firm productivity growth that is an engine of growth in the private sector and by extension, would fuel up overall economic growth and poverty reduction.Originality/valuePrevious studies on exports and growth in Uganda have been basically focused on macro‐data analysis; yet, promoting rapid expansion of manufactured exports may require more than just a good macroeconomic policy environment. This study fills the research gap by relating firm‐level productivity performance to the microeconomic environment in which manufacturing firms operate.

Firm Turnover and Productivity Growth in Selected Canadian Services Industries, 2000 to 2007

The nature of the competitive process that causes a reallocation of market shares within an industry contributes to aggregate productivity growth. This paper extends our understanding of industry differences in the competitive process by examining firm turnover and productivity growth in various services industries in Canada and situating them relative to retailing and manufacturing, two industries that have been the focus of these studies in the past. Seven industries in the services sector, namely wholesale trade, transportation and warehousing, air transportation, truck transportation, broadcasting and telecommunications, business services and financial services, are examined. The effectiveness of entry (measured as market share captured) differs considerably more across industries than does its intensity (measured in terms of the percentage of new firms experimenting with entry at any point in time). Business services and truck transportation have the highest effective entry rates. The failure process within entrants is similar across industries, but in industries where entrants are relatively large at birth, the penalty for entry at suboptimal size or productivity is higher. The reallocation process of market share varies across industries, ranging from shifts between incumbents solely in broadcasting and telecommunications, to large gains by entrants at the expense of incumbents in business services and truck transportation. However, firm turnover contributes positively to productivity growth in all industries, with the turnover due to entry and exit being the most important contributor to productivity growth. The industries that most resemble retail in terms of relative importance of entry and its contribution to productivity growth are business services and truck transportation.

Does FDI Spur Productivity, Knowledge Sourcing and Innovation by Incumbent Firms? Evidence from Manufacturing Industry in Estonia

AbstractDoes FDI affect knowledge sourcing activities, innovation and productivity growth of domestic firms? This study employs firm‐level panel data from Estonia’s manufacturing sector to investigate different channels through which FDI affects domestic firms. Based on instrumental variables approach, I find no evidence of an effect of FDI entry on local incumbents’ short‐term productivity growth. However, there is positive association between the entry of FDI and the more direct measures of spillovers. FDI inflow to a sector is associated with more knowledge flows to domestic firms and increase in their innovation activities.

When Does Reducing Union Bargaining Power Increase Productivity? Evidence from the Workplace Relations Act*

Despite a large empirical literature, the conditions under which unions have different effects on productivity have not been determined. The Australian Workplace Relations Act 1996 (WRA) provides a natural experiment in which union bargaining power was decreased. We estimate productivity growth before and after the WRA. While the WRA did not increase productivity growth in union firms compared with non-union firms, in industries with more extensive unionisation, productivity growth in union firms was greater post-WRA compared with pre-WRA growth for non-union firms. This suggests unionisation tends to have greater effects on productivity in sectors where it is more extensive.

Productivity Growth and Competition in Spanish Manufacturing Firms: What Has Happened in Recent Years?

This paper addresses the issue of the relationship between productivity and market competition. In comparison to the economies of other European countries, the Spanish economy has been growing, while productivity growth has stagnated. Here we provide empirical evidence about the relationship between productivity and market competition from Spanish manufacturing firms at firm level between 1994 and 2004. Correcting for selection bias, our study pays special attention to the patterns of productivity growth between openness and non-openness firms. When market competition increases the effect on firms operating in domestic markets is positive but when the level of competition is high incentives to invest in innovation and productivity gains disappear. The empirical relationship between competition and productivity is an inverted U-shape, where productivity growth is highest at intermediate levels of competition. The productivity growth of firms operating in international markets is higher than that of non-openness firms, but when market competition rises they moderate their productivity growth. Our empirical results suggest that the correct competition policy in the Spanish economy should remove the barriers to competition in internal markets in order to increase the incentives for manufacturing firms to invest in innovation and productivity growth.

Is energy intensity important for the productivity growth of EET adopters?

Energy Efficient Technologies (EET) have attracted strong interest because of their role in reducing environmental damage. Their adoption, however, remains rather low, while their impact on productivity is substantial and differentiating with respect to technological characteristics. Energy intensity, being such an obvious characteristic, could be employed to classify EET adopters thus giving rise to two heterogeneous technologies (i.e. those corresponding to firms of low and high energy consumption). Hence, this paper examines the impact of energy intensity on the productivity growth of firms adopting EET in varying time intervals through a metafrontier-based framework, while also decomposing that impact in terms of technical, efficiency and scale-efficiency changes. The analysis is complemented by examining the role of firm-specific characteristics on the productivity growth through linear regression.