Firm Total Factor Productivity Research Articles

Tax-reducing incentive and corporate green performance: What we learn from China

Using a large sample of Chinese firms for the period 2008–2019, we provide strong and robust evidence that tax-reducing incentives are positively associated with corporate environmental performance. Previous research has found that tax reduction incentives can promote green performance by improving the total factor productivity of firms and provide long-term benefits. This facilitation is highly effective among non-state-controlled renewable energy companies. After grouping the tax reduction incentives according to the 25th quantile, it was found that with an increase in the tax reduction incentive intensity among different groups, the green environmental protection performance of enterprises presents an inverted V-shaped characteristic wherein promotion is followed by inhibition. Furthermore, we show that the positive relationship between tax incentives and green performance weakens when firms face uncertainty in their external environment. The conclusions of this paper can help government decision-makers identify the source of green performance improvement, optimize the design of fiscal policy, and then formulate an effective renewable energy development strategy to accelerate the green transformation of Chinese enterprises.

Do tax reductions stimulate firm productivity? A quasi-natural experiment from China

Tax reductions for firms in the real economy are important reforms to address slowdowns in economic development in the complex current social and economic situation. To deeply explore the influence of tax reductions on firm development, this article considers firm total factor productivity as an indicator. A policy allowing accelerated depreciation of fixed assets implemented in 2014 and 2015 is taken as a policy shock to construct a gradual difference in difference (DID) model. Based on data from listed companies in China from 2010 to 2018, this article studies the influence of the policy on firm total factor productivity. The empirical results show that the policy significantly and sustainably improved the total factor productivity of the pilot firms. The policy improved productivity mainly by increasing corporate investment in fixed assets, stimulating R&D spending, and alleviating internal financing constraints. Further results reveal that the productivity effect of the policy is more prominent in non-state-owned enterprises and labor-intensive or growth-oriented enterprises. The research in this article helps deepen the understanding of the micro-foundations of the effects of tax reductions and provides a reference to leverage the micro-effects of such policies.

Blockchain and Firm Total Factor Productivity: Evidence from China

This paper creatively constructs blockchain development indicators using geographical characteristics to investigate the influence of blockchain development on the total factor productivity of listed companies. Our findings reveal that local blockchain development can significantly promote the improvement of the firms’ total factor productivity. To alleviate endogeneity, this paper combines exogenous policy and geographic distance to construct instrumental variables. Moreover, the positive influence is more pronounced in non-SOEs, non-excess capacity industries, and samples with high initial productivity. After the robustness test, the results are still valid. The aforementioned results provide practical implications for Chinese listed companies to lay out digital business.

Fostering firm productivity through green finance: Evidence from a quasi-natural experiment in China

This study investigated how green finance affects the total factor productivity (TFP) of firms in heavily polluting industries. In 2017, the People's Bank of China (PBC) issued a policy of incorporating green finance into its macroprudential assessment system. Applying this event as a quasi-natural experiment to identify causality, we used a difference-in-differences approach to show that the PBC's green finance policy can improve the TFP of firms in heavily polluting industries, thus confirming the Porter hypothesis of environmental regulations. While exploring mechanisms, we showed that the PBC's policy can tighten credit to firms in such industries, forcing them to engage in green innovation and reduce their agency costs, thereby improving their TFP. In addition, the PBC's green finance policy mainly promotes TFP in large-scale and nonzombie firms in heavily polluting industries and in firms in regions with weak bank competition.

Effective R&D capital and total factor productivity: Evidence using spatial panel data models

It is widely accepted that R&D investment improves technological progress. The R&D capital that boosts a firm's production efficiency has various sources. This paper uses “effective” R&D capital, which represents not only a firm's internal R&D input but also the benefit derived from R&D collaboration and accessible knowledge capital, to empirically examine its effects on a firm's productivity. Accounting for technological distance and the endogeneity problem of weights matrices, we use spatial panel data models to estimate the return of R&D capital within the framework of the production function. We estimate the production function using the firm-year data of Shanghai technological enterprises from 2009 to 2017. The results show positive, significant relationships between each element of “effective” R&D capital and total-factor productivity (TFP). Knowledge spillovers have greater impacts on a firm's TFP than its internal R&D input and R&D collaboration. The contribution of R&D collaboration to TFP is less than that of internal R&D, indicating that R&D collaboration is not fully internalized. The results imply that a better environment for R&D collaboration and technology exchange is needed.

Impact of Intelligent Development on the Total Factor Productivity of Firms – Based on the Evidence from Listed Chinese Manufacturing Firms

The new industrial revolution featuring artificial intelligence (AI) as its core is flourishing globally. However, there are many controversies surrounding the impact of AI on productivity owing to the different understandings of its development. Thus, this study adopts a text mining method to construct indicators for measuring the intelligent development of enterprises based on the information obtained from the annual reports of listed Chinese manufacturing companies from 2009 to 2019. To explore the impact of intelligent development on the total factor productivity (TFP) of enterprises, fixed-effect regression and panel threshold models are employed to empirically prove its overall and threshold effects. The result reveals that the impact of intelligent development on TFP of enterprises is significantly positive at the aggregate level. Regarding the stage characteristics, “Solow’s paradox” exists in the development of intelligence. The effect of intelligence development on TFP is not significant at its early stage; moreover, the rapid development of intelligence exerts a “promotion effect.” However, at the extreme stage (when intelligent development crosses the critical value), it exerts a negative effect on the TFP of enterprises.

Does digital technology innovation work better for industrial upgrading? An empirical analysis of listed Chinese manufacturing firms

ABSTRACT Using the panel data of Chinese-listed manufacturing firms from 2008 to 2019, in this paper we apply the patent data and econometric models to identify digital technology innovation and to explore the mechanism for the digital technology innovation on industrial upgrading of the manufacturing firms. We also use the total factor productivity of firms to measure industrial upgrading of manufacturing firms. Our empirical results show that digital technology innovation is conducive to industrial upgrading of manufacturing firms. We find that the total factor productivity of firms with digital technology patents is significantly higher than that of firms without digital technology patents, and more importantly, the total factor productivity increases on higher scales of digital technology patents at an increasing rate. In addition, owning digital technology patents generates boosts to the total factor productivity of manufacturing firms through reducing the operating costs, improving the efficiency of resource allocation and enhancing the innovation capability.

The impact of smart city pilots on corporate total factor productivity.

The existing literature on smart city pilots mainly focuses on the city level and rarely addresses the firm level. This paper assesses the impact of smart city pilot policy (SCP) on firms’ total factor productivity (TFP) and explores the impact of SCP under different heterogeneities as well as the mechanisms of action of the SCP. The LP approach is used in this paper to measure firms’ TFP, and the impact of SCP is analyzed by the DID model with firms’ panel data from 2009 to 2019 as research objects. First, it was found that the SCP can significantly increase the TFP of firms (0.041). Second, through heterogeneity analysis, we found that SCP can strengthen the monopoly position of monopolistic firms and state-owned enterprises. Moreover, the SCP can also alleviate the development imbalance of TFP between firms in coastal and non-coastal areas. In addition, SCP can significantly improve TFP of heavy polluting enterprises. Finally, we find that the important ways for SCP to improve firms’ TFP is increasing investment in technological innovation, talent agglomeration, attracting financing, improving resource allocation efficiency, and digital transformation. The study provides unique insights for policy makers and business managers in China and other emerging countries to enhance TFP and achieve corporate sustainable development.

Robot adoption and export performance: Firm-level evidence from Spain

Export activities are crucial for firm performance. Existing evidence shows that technology adoption is an essential determinant of firm competitiveness. Nevertheless, scarce attention has been devoted to robotisation, a new technology that firms increasingly adopt. We investigate the effect of robot adoption on the intensive and extensive margins of exports of Spanish manufacturing firms over the period 1990–2014. We combine the propensity score matching (PSM) and difference in differences (DID) techniques and find that firms adopting robots experience a sharp increase in their export probability, export sales and share of exports in total output. This result persists after a wide array of robustness checks, including the use of instrumental variables. Robot adoption favours export entry and survival and fosters the export activity of intermediate goods’ producers. The positive impact of robot adoption on exports is driven by its positive effect on firm total factor productivity, product innovation and importing.

The effect of environmental regulation on firm productivity: evidence from pulp and paper industry in China

The relationship between environmental regulation and firm productivity has been widely debated but inconsistencies in findings across different studies. Using detailed firm-level micro-data from 2000 to 2007, this paper employs difference-in-difference combined with matching based on entropy balancing method to explore the effect of environmental regulation on firm total factor productivity (TFP) in pulp and paper industry in China. Our main findings are as following: Firstly, stricter environmental regulation, as represented by the Wastewater Discharge Standards for Pulp and Paper Industry in Shandong province, increases firm TFP significantly. Moreover, the coefficients of interest are robust to multiple robustness checks. Secondly, dynamic effects estimates reveal that when faced with this phase-in environmental regulation, firms take the foreseeably increasing strictness into account from the very beginning and prefer to take one-step adjustment to reach full compliance. Thirdly, potential mechanism analysis finds that the positive effect mainly comes from the improvement of resource allocation efficiency within firms. Fourthly, the heterogeneity test indicates that the effect of environmental regulation on firm TFP is heterogeneous across firms with different sizes, ages, ownerships, capital intensity, and export status. Finally, this paper provides convincing and insightful evidence that environmental regulation has the potential to achieve the dual goals of environmental sustainability and economic growth and is thus of broader significance for understanding the enforcement of environmental regulation in developing countries.

The Effect of Corporate Social Responsibility on Productivity: Firm-Level Evidence from Chinese Listed Companies

ABSTRACT The recent promotion of Corporate Social Responsibility (CSR) by China has coincided with a marked increase in the number of its listed firms. To what extent can the disclosure of CSR reports benefit corporate productivity? This article empirically explores the impact of CSR on firm-level Total Factor Productivity (TFP) as well as the possible influence approaches and mechanisms. Following previous literature, several predictive models are built to draw the following conclusions: (1) CSR significantly promotes TFP; (2) the impact of CSR on TFP of family firms is greater than that of non-family firms; (3) CSR has a larger positive impact on firms releasing CSR reports voluntarily than on those releasing under compulsion; (4) CSR has a greater impact on private firms than on state-owned ones, while it has little effect on foreign-funded ones; (5) The impact of CSR on TFP is robust in high-tech firms, non-high-tech firms, coastal firms, non-coastal firms, industrial firms, and service firms. Besides, this article finds that financing constraints operate as a major channel for CSR to affect TFP, while firms’ irregularity acts only as an important channel. Additionally, 2SLS method is employed to deal with possible endogenous problems, finding that our conclusions remain robust.

Can environmental regulation improve firm total factor productivity? The mediating effects of credit resource allocation

Can environmental regulation improve firm total factor productivity? The mediating effects of credit resource allocation

The value of higher education to entrepreneurial performance: Evidence from higher education expansion in China

Using the Enterprise Survey for Innovation and Entrepreneurship in China (ESIEC) 2018 database, we estimate the effect of the higher education of entrepreneur on firm performance. The expansion of higher education in China that began in 1999 is considered as an exogenous shock to identify causal effects. We find (1) that college education of entrepreneur significantly increases the total factor productivity of firms; (2) that college education of entrepreneur significantly increases the probability of innovation; and (3) that college education of entrepreneur significantly increases the likelihood that firms will gain policy supports from governments. The estimation results suggest that the increasing human capital of entrepreneurs is an important driving force for productivity growth in China. The study has policy implications for both higher education expansion and entrepreneurship.

The role of wages, skills development and R&D on productivity: evidence from Thai manufacturing firms

PurposeThe objectives of this study are to investigate the role of wages, skills development and R&D on the productivity of Thai manufacturing firms, using data from the 2017 Industrial Census of Thailand.Design/methodology/approachThe paper uses two-stage least squares (2SLS) to examine the role of wages, skills development and R&D, as well as other vital factors, impacting productivity as measured by labour productivity and total factor productivity.FindingsThai manufacturing firms' technology in aggregate exhibits decreasing returns to scale. Increasing wages and skills development promote the labour productivity and total factor productivity (TFP) of Thai manufacturers. R&D is also shown to be vital in promoting the labour productivity and TFP of large firms, but not small firms. Foreign direct investment (FDI) and government support can significantly increase large and medium-sized firms' labour productivity and TFP. Financially constrained firms tend to perform more productively. However, older firms, larger firms, labour supply shortages and political instability adversely affect labour productivity and TFP.Practical implicationsUpskilling and improving HRD policies could move Thailand towards a knowledge-based and high-income country in the future. Intellectual property protection should be strengthened to boost the country's R&D. The government should consider lifting restrictions on FDI to encourage international openness. The Thai Board of Investment’s promotion should target Thai manufacturing firms and FDI.Originality/valueThis study is the first to examine in detail the role of wages, skills development and R&D on the productivity of Thai firms based on the 2017 Thailand Industrial Census.

Local corruption, total factor productivity and firm heterogeneity: Empirical evidence from Chinese manufacturing firms

• A novel dataset to measure local corruption in China that controls for officials’ rank, tenure, investigation reason and corruption latency. • Corruption has a significant negative effect on manufacturing firm TFP, conditional on firm and city heterogeneities. • Publicly owned, export-oriented, profitable, faster growing firms and firms in concentrated industries are less sensitive to corruption. • Firms in cities with higher levels of human capital and public spending on education and scientific research are less sensitive to corruption. • Corruption also hurts private ownership, investment rate, export intensity, innovation, leverage, employment growth, and profitability. This paper examines the effects of local corruption on total factor productivity (TFP) of manufacturing firms in China. The empirical analysis is based on a novel corruption dataset we developed on local corruption in China at various disaggregation levels. The empirical results using fixed effects and instrumental variable estimation methods suggest that corruption has an economically and statistically significant negative effect on firm productivity. The estimated economic cost of corruption is found to be high; a one standard deviation increase in corruption reduces firm TFP by around 3.8%. We also find that firm heterogeneity shapes business reactions to corruption in a given geographical location. Increasing corruption hurts firms less when they are publicly owned, export-oriented, more profitable, have faster growth, or operate in industries with lower levels of competition. We also show that firms in cities with higher levels of human capital and higher levels of public spending on education and scientific research are less sensitive to corruption. As for transmission channels, we find that corruption is likely to hurt TFP through its negative effects on private ownership, investment rate, export intensity, innovation, leverage, employment growth, and profit.

Analysis of the Impact of M&A Goodwill on a Firm's Total Factor Productivity

Using A-share listed companies in Shanghai and Shenzhen from 2008 to 2020 as the original sample, this paper focuses on the impact of M&A goodwill and on the total factor productivity of firms, so as to gain an in-depth understanding of the profound effect of M&A goodwill on firms. The main findings of this paper are: (1) M&A goodwill is negatively related to total factor productivity, i.e., it significantly reduces the total factor productivity of firms. (2) The mechanisms by which M&A goodwill affects firms' total factor productivity are: first, M&A goodwill changes asset allocation decisions, and second, it increases firms' executive compensation and Over-indebtedness. The research in this paper is based on a new perspective of M&A goodwill, which enriches and extends the micro foundations of total factor productivity theory. It also provides a detailed empirical analysis of the association between M&A goodwill and corporate total factor productivity from the perspective of listed companies as a whole, which is innovative. The further analysis of the relevant reasons remedies the lack of understanding of this aspect in the previous literature. In addition, the findings of this paper provide reflections and policy implications from three perspectives: firms themselves, regulators and investors.

Impact of global value chains on total factor productivity: The case of Indian manufacturing

AbstractWith production increasingly fragmented across borders, global value chains (GVCs) form a key feature of the world economy. A rising body of literature has documented productivity gains from linking into GVCs for developed‐country firms, but studies on the same for developing countries are scant. In this paper, we empirically examine whether GVCs can increase total factor productivity (TFP) in developing countries, using an unbalanced panel of Indian manufacturing firms in the period 2000/2001–2014/2015 from the Prowess data set. To address econometric issues of self‐selection and endogeneity, we use a two‐stage empirical strategy of propensity score matching and system generalized method of moments. The results indicate that linking into GVCs has a positive and significant impact on firm TFP, even after accounting for self‐selection of more productive firms into GVCs. Once linked, increasing GVC embeddedness, captured through firm‐level vertical specialization, also has a positive and significant impact on firm productivity. But productivity gains are not homogenous; GVC firms that link into relational governance chains, captured through the share of skilled workers and infrastructure and communication index relative to industry, have 20% higher productivity growth than firms in other chains. Older and more liquid GVC firms are also more productive. Designing policies to facilitate GVC linkages and firm technological capabilities can thus foster productivity gains in developing countries.

Power shortage and firm productivity: Evidence from the World Bank Enterprise Survey

This paper extends a standard model of monopolistic competition with heterogeneous firms and incorporates energy as intermediate input. The effect of energy shortage on firm productivity is illustrated theoretically and examined empirically. Our reasoning contributes to the understanding of the mechanism by which energy shortage affects the productivity of enterprises. The empirical analysis is based on the World Bank's global enterprise survey dataset for 119 countries over the period 2007-2017. Our empirical results indicate that: (i) power shortage imposes a significant negative impact on firm total factor productivity (TFP); (ii) power shortage reduce firm TFP by jeopardizing skilled workers' productive activities; (iii) TFP of private enterprises is vulnerable to power shortage; (iv) and productivities for the firms located in low- and middle-income countries are sensitive to power shortage. The empirical results also shed light on TFP-enhancing energy policy formation. The government should provide a stable supply of energy and power shortage relief measures to ensure economic development. Since private firms in low and middle-income countries are most vulnerable to power shortages, the energy policy formulated by the governments of these countries should be tilted towards their private entities.

Financing Constraints and Firm's Productivity Under the COVID-19 Epidemic Shock: Evidence of A-Shared Chinese Companies.

Focusing on the financing barriers to firm productivity improvement under the influence of external shocks, we empirically analyze the data of A-share listed companies from 2007-2018 to determine the impact of financing constraints on total factor productivity (TFP) in the context of COVID-19 pandemic and the paths of factor use efficiency and R&D innovation efficiency on this impact using ordinary least-squares (OLS) method. We find that financing constraints are an important factor inhibiting the TFP of firms. This inhibitory effect is more serious in small-scale firms, non-state firms, and non-energy firms. Further investigation shows that the inhibitory effect of financing constraints on firms’ TFP is more pronounced when firms are located in the Yangtze River Delta city cluster, the Pearl River Delta city cluster, non-port cities, and provincial capitals. The mechanism test finds that improving the efficiency of capital use and labor use can alleviate the suppressive effect of financing constraints on TFP. The alleviating impact is more significant when capital use efficiency is improved. However, increasing the efficiency of R&D innovation further strengthens the inhibitory effect of financing constraints, and this effect is more pronounced under positive external shocks.

The Impact of State Ownership on the Productivity of China’s Agri-food Firms

This study examines the effects of state ownership on the productivity distribution of different quantiles of China’s agri-food firms based on data from the Chinese Industrial Enterprises Database between 1998 and 2013. Using panel quantile regression, this study finds that the contribution of state ownership to productivity varies across different quantiles of the productivity distribution. State ownership inhibits total factor productivity (TFP) of firms with low-level productivity but has no effect on TFP for firms with medium- and high-level productivity. Regions play a moderating role on the state ownership-productivity link. Regional economic development alleviates the inhibition of state-owned capital on the TFP of firms with low- and high-level productivity.