Production Efficiency Of Firms Research Articles

Determinants of Export in Boom and Bust: Evidence from the Indian Electronics Industry

India’s exports of electronics products underwent two major phases after 2000–2001. A boom phase from 2000–2001 to 2008–2009, where growth of Indian electronic exports increased significantly, and a bust phase from 2009–2010 to 2019–2020, with drastic decline in its growth. This gives us an opportunity to estimate and compare the factors that help firms to sustain exports in different phases of export growth. Using firm-level panel data and instrumental variable Tobit (IVTobit) model, this study shows that during the boom period, firms’ spending on research and development (R&D), imported technology and raw materials explain their exports. Firms’ age and multinational enterprises (MNEs) affiliation are also important for export in this phase. In the bust period, along with firms’ age, import of technology and raw materials, domestic raw materials, size, advertisement expenses and production efficiency of firms have emerged as important factors in determining export. These finding suggests that larger firms with high technical efficiency manage to export even during the bust period. Moreover, to export during the bust period, firms need to spend on domestic raw material, import of technologies and promotion of their products rather than spending on R&D activities. JEL Codes: F440, L6, L63, F140, L250, C240, C260

Corporate social responsibility, industry competition and firm productive efficiency: evidence from semi-parametric and non-parametric analysis

Corporate social responsibility, industry competition and firm productive efficiency: evidence from semi-parametric and non-parametric analysis

Institutional Ownership and Firm Productive Efficiency: Is It All About Time? Evidence from France

Le marché français des actions a été témoin de la montée en puissance des investisseurs institutionnels au cours des dernières années. Malgré cette montée en puissance, leur effet sur l’efficacité productive des entreprises reste complexe et mérite d’être approfondi et analysé empiriquement. Cet article tente de combler cette lacune en examinant l’influence des investisseurs institutionnels sur l’efficacité productive des entreprises à travers la dimension de leur horizon d’investissement. En utilisant un échantillon de 123 entreprises françaises cotées sur la période 2008-2018, nous utilisons des approches semi-paramétriques et non-paramétriques pour estimer l’efficacité productive des entreprises. Les résultats montrent une association positive entre la propriété des investisseurs institutionnels, en particulier ceux ayant un horizon d’investissement long, et l’efficacité productive de la firme. Ce résultat est tout à fait cohérent avec l’hypothèse d’un contrôle efficace. Une analyse plus poussée montre que cet effet positif est plus important dans les entreprises opérant dans un environnement peu concurrentiel, ou dans celles ayant une faible qualité de gouvernance. Ces résultats sont révélateurs de l’efficacité de la surveillance par les investisseurs institutionnels dans les pays de droit civil comme la France. Globalement, nos résultats sont robustes à plusieurs tests d’endogénéité et ont des implications politiques importantes.

Efficiency Evaluation of Cyber Security Based on EBM-DEA Model

Cyber security aims to protect against the unlawful use of systems, networks, and technologies by lowering the likelihood of cyberattacks and thwarting their execution. The comparatively low degree of security, which plays an essential part in the activities of any nation, has been a primary contributor to the low overall operational efficiency. In addition, implementing machine learning and artificial intelligence would make the network vulnerable to several severe vulnerabilities in terms of cybersecurity, which could lead to disastrous results. Therefore, research into the efficacy of cyber security is essential to ensure the future safety of the whole world. An EBM evaluation approach was utilized in this research project so that the production efficiency of firms on a micro level could be assessed. After that, it analyzed the effectiveness of cybersecurity organizations' input and output variables by using financial data for 2020 from sources in the US market. It was found that DMU 1, DMU 7, DMU 9, and DMU 10 had the highest performance levels. After doing an efficiency analysis of the ten most prominent organizations now functioning in the cybersecurity sector, we realized that three of those companies required significant modifications. However, four of the other businesses were typically more efficient.

Tax Incentives, On-the-job Training, and Human Capital Accumulation: Evidence from China

This study investigates the effects of an increase in the proportion of tax credit (IPTC) policy on firms' on-the-job-training expenses. We document that the IPTC significantly increases on-the-job training expenses; the result remains valid after a series of robustness tests. An analysis of heterogeneous effects shows that privately owned firms and small-scale firms are more susceptible to the IPTC's impacts than state-owned and large-scale firms. Finally, we find that the IPTC can improve the production efficiency of firms and promote firm performance and innovation.

Demonstration zones reform and corporate philanthropy: Evidence from China

Place-based policy plays an important role in economic growth, but its impact on corporate philanthropy is relatively unknown. The transformation and upgrading demonstration zones reform, a place-based policy in China, delegates the discretion of giving preferential treatment to some local firms to local officials, which we characterize as the discretion of local officials. Based on this policy, this study identifies the causal effect of the discretion of local officials on corporate philanthropy by using firm-level data during 2014–2019. We find that demonstration zones reform promotes corporate philanthropy, and this effect is particularly pronounced in firms with non-state ownership, firms without political connections, firms with high financial constraints, and firms with heavy pollution. Further, we find that demonstration zones reform increases visibility, reputation, and access to resources by promoting corporate philanthropy. In addition, demonstration zones reform can improve the production efficiency of firms, especially for firms with high corporate philanthropy.

The Effect of Government Subsidies on The Teal Activity of Firms: Evidence from Chinese Listed Firms

We examine the effect of subsidies on the real activity of firms using a panel of Chinese listed firms from 2008 to 2013. Employing the Propensity Score Matching method (PSM) and Differences in Differences method (DID), the study showed that government subsidies were not only highly effective at promoting investment and job creation, but they enhanced short-term productive efficiency of firms. Meanwhile, we find that there was significant cross-sectional variation in firms’ response to subsidies, and non-state-owned firms (non-SOEs) benefited more from subsidies than state-owned enterprises (SOEs) in the short term.

Foreign currency hedging and firm productive efficiency

This study assesses whether foreign currency (FC) hedging improves firm productive efficiency. Using a unique sample of French non-financial listed firms belonging to the CAC All-Tradable index (former SBF250 index) index over the period 2004–2012, we employ a non-parametric method—data envelopment analysis—to estimate a firm’s efficiency frontier and analyze the role of financial hedging in addressing agency conflicts in France. The empirical results show that FC hedging has a significant positive effect on efficiency. This finding supports the theoretical view that hedging is a disciplinary device that can mitigate the owner–manager agency conflicts, leading to a better firm efficiency. The results are robust to a battery of sensitivity and endogeneity tests.

Employee downsizing, financial constraints, and production efficiency of firms

This study examines the effects of employee downsizing strategies on production efficiency of firms by applying the stochastic frontier analysis. Using Taiwan’s manufacturing firms over the financial crisis period of 2008–2015 as the sample, we show that employee downsizing enhances the contemporaneous production efficiency of firms. Downsizers also have continuous efficiency improvement in the post-downsizing phase. The increase in efficiency is particularly significant for firms that implement downsizing with concurrent asset reduction or repeated episodes. Evidence also indicates that financially constrained firms have a greater tendency to downsize. Downsizing firms that face less financial constraints can have better production efficiency than others. We suggest that adequate financial resources for supporting complementary practices are necessary to achieve higher efficiency through employee downsizing.

Large shareholders, control contestability and firm productive efficiency

This paper investigates the effect of the largest controlling shareholders on firm productive efficiency. Using a sample of French listed firms, we employ parametric (linear regression), semi-parametric (Olley and Pakes) and non-parametric (Data Envelopment Analysis) approaches to estimate productive efficiency. We find a negative association between the excess control rights of dominant owners and firm productive efficiency, indicating that their private benefits of control prevent them from favoring productive projects. Our findings withstood several sensitivity and endogeneity tests. Additional analysis shows that multiple large shareholders, beyond the controlling owner, play a governance role that neutralizes the effect of excess control on productive efficiency.

Creativity, innovation effectiveness and productive efficiency in the UK

PurposeCreativity is often referred to as a seedbed of innovation. As such it holds the key to better performance and the competitiveness of firms. To better understand how creativity influences birth and commercialization of innovations and productive efficiency of firms the paper investigates how hiring of employees with different creative skills impacts innovation process and productivity. The purpose of this paper is to determine the role of creativity in innovation behavior and productive efficiency of firms.Design/methodology/approachTheoretical framework of the paper rests on pillars of evolutionary, Schumpeterian and endogenous growth literature contributions to the economics of innovation. The multi-stage analytical framework is applied to examine contribution of creativity to the decision of firms to innovate, investment in innovation activities, commercialization of innovations and firm efficiency. The econometric techniques of generalized tobit and simultaneous equations framework are applied to confidential data from the UK Innovation Survey in 2010-2012 period.FindingsThe investigation broadens our understanding of factors and forces that shape innovation process and improve productive efficiency of firms. It provides empirical evidence on an impact of the effectiveness of innovation process on the productivity of firms. The results reveal that creative skills contribute to the generation of novel ideas and investment in research and development but the ability to meet customer requirements draws from other organizational skills such as marketing or organizational innovations. Differences are revealed among economic sectors with respect to the forces driving the innovation process.Research limitations/implicationsFurther research will be needed to investigate cross-country differences in management of creativity and its contribution to the innovation process and productivity. The limited availability of data on creativity and innovation activities of firms presents the most important limitation in this sense. The framework set by this paper can serve as direction for further investigations.Practical implicationsThe results provide implications to managers regarding the management of innovation process. First, the study reveals how creative potential of employees can be optimally exploited in different stages of innovation process. Second, the research highlights number of other factors relevant in this process from the utilization of information, subsidies and the general management of human resources. Finally, the results suggest that sectoral heterogeneity should be taken into account in management of innovation activities of individual firms.Originality/valueWhile the impact of creativity on innovation has been addressed previously, this paper is one of first attempts to examine the linkages between management of creativity, effectiveness of innovation process and productive efficiency of firms within a single framework. One of reasons for this is the fact that it relies on the confidential dataset of firms not easily accessible to researchers.

Productive Efficiency and Ownership When Market Restructuring Affects Production Technologies

While the link between the ownership and productive efficiency of firms has been discussed extensively, no consensus exists regarding the superiority of one or the other in non-competitive, regulated environments. This paper applies a flexible production model to test for efficiency differences associated with ownership types while allowing the production to adapt to market restructuring over time. Our empirical setting is based on a new, rich micro dataset of electricity distribution firms operating between 2006 and 2012 in Germany, where the energy transition enforces the adjustment of energy infrastructure. First, our results show that electricity distribution system operators adapted their production technologies over time. Second, there is no empirical evidence that public firms operated any less efficiently than private firms. The empirical findings are relevant to the (re)municipalization debate, which appears to have exaggerated the dichotomy between public and private utilities’ efficiency.

Power Outages and Production Efficiency of Firms in Africa

Literature shows that power generation capacity in sub-Sahara Africa is lower than that of any other region in the world and capacity growth has also stagnated. Africa currently faces major electricity shortages with a number of power outages which has the tendency of rendering many firms less efficient in their production. This study therefore seeks to find the impact of power outages on production efficiency of firms in Africa. The source of data is the World Business Environment Survey conducted by the World Bank. The analysis deployed stochastic production frontier and a two-tail Tobit models. The finding shows that the number of power outages experienced in a typical month has a negative impact on the production efficiency of firms in Africa. This call for immense investment projects in new generation capacity in order to ameliorate the negative effect of power crisis on production process of firms in Africa.

Political Connectedness, Corporate Governance, and Firm Performance

In this paper, we present and test a theory of how political connectedness (often linked to political corruption) affects corporate governance and productive efficiency of firms. Our model predicts that underdeveloped democratic institutions that do not punish political corruption result in political connectedness of firms that in turn has a negative effect on performance. We test this prediction on an almost complete population of Slovenian joint-stock companies with 100 or more employees. Using the data on supervisory board structure, together with balance sheet and income statement data for 2000–2010, we show that a higher share of politically connected supervisory board members leads to lower productivity.

Can Ownership Concentration and Structure be Linked to Productive Efficiency?: Evidence from Government Linked Companies in Malaysia

Abstract This paper examines the ownership concentration and structure, and analyzes its impact on firm productive efficiency. A stochastic frontier model with inefficiency effects is fitted to an unbalanced panel dataset of 31 government-linked companies (GLCs) listed at Malaysia's Stock Exchange (Bursa Malaysia) over a period of 12 years (2001-2012). The results of the analysis reveal the government's shareholdings have significantly improve productive efficiency over time, although the link is weak. The insignificant positive link between ownership concentration and inefficiency, and between board ownership and inefficiency, imply high ownership concentration and board ownership are not effective corporate governance mechanism in improving efficiency. Although there is a strong evidence to show government ownership is positively related to productive efficiency, having high ownership concentration tend to influence inefficiency, concurring earlier studies that highly concentrated shareholding with complex pyramidal and cross-holdings ownership can signal underlying performance vulnerability in the long run. The study also observes that gradual but slow improvement in the GLCs efficiency levels, and that output generation has been labour-using and capital-saving over time.

Does Foreign Ownership Increase Firms’ Productivity? Evidence from Firms Listed on Amman Stock Exchange

AbstractThe purpose of this paper is to investigate the impact of foreign ownership on the production efficiency of firms listed on the Amman Stock Exchange using hand-collected, firm-level data. Arab countries have been performing poorly in attracting foreign direct investment (FDI) inflows in comparison to other developing countries, and hence, they may be missing out on growth and development opportunities. Jordan, however, has been one of the most successful Arab countries in attracting FDI inflows relative to its economic size. Therefore, Jordan offers an ideal setting to examine the benefits of foreign ownership in the region. However, this study fails to find evidence supporting the notion that foreign ownership enhances production efficiency. This finding calls into question the economic viability of investment incentives designed to attract foreign investors.

A simple model of endogenous growth with financial frictions and firm heterogeneity

This paper constructs a simple model of endogenous growth with financial frictions and firm heterogeneity. In the presence of financial constraints and heterogeneity in production efficiency of firms, the firms whose efficiency exceeds the cutoff level produce and the entrepreneurs who own those firms become borrowers. We show that even if production technology of each firm has an Ak property, the aggregate economy has transition dynamics and that the balanced growth rate depends on the aggregate distribution of wealth between rentiers and entrepreneurs.

A Case Study of Sustainable Manufacturing Practices

Sustainable manufacturing practices aims at minimizing the impacts of manufacturing operations on the environment while optimizing the production efficiency of firms. Today, products are no longer judged by the price but the sustainable initiatives implemented by firms. Efforts to reduce the environmental impacts of manufacturing operations have traditionally been viewed as an obstacle to profitability and efficiency. However, studies have shown that the implementation of sustainable manufacturing practices is beneficial to firms. This research reports a case study on the sustainable manufacturing practices of a selected company in Kedah, Malaysia. Data were collected using a semi-structured interview from key personnel in the company that directly involved in the implementation of the practices. The interview was recorded and transcribed and the result revealed that responsive product strategy, lean practices, supply chain restructuring and sustainable material and design are the sustainable manufacturing practices implemented by the case company while on-time delivery, recycle carbon fibre and trend to green material are the benefits of sustainable manufacturing practices. 

Managerial pay adjustments: Decomposition and impact on firm productive efficiency

Abstract This paper decomposes managerial pay adjustments and examines their impact on firm productivity based upon Taiwanese firm panel data. Pay adjustments are decomposed into components arising from three sources: a scheme based on the external labour market comparisons, a scheme derived from the changes in firm and manager characteristics, and transitory pay adjustments. The stochastic frontier model is used to test how these pay components affect firm productivity. Empirical results suggest that the pay adjustments based on the comparison between managers' actual pay and their market-clearing pay are positively related to the output and technical efficiency of the firms, whereas this productivity-boosting effect cannot be seen for other components. This paper shows the importance of the external labour market in connecting managerial pay to firm productivity, and provides a model for the research of managerial pay in an environment where the compensation structure does not have apparent stock incentives.

Privatisation and productive efficiency of firms in Nigeria

Privatisation and productive efficiency of firms in Nigeria