What Drives the Productive Efficiency of a Firm?: The Importance of Industry, Location, R&D, and Size



Table 9: Distribution of estimated linear efficiency trends θi

Variable N      mean cv     p90 q3     median q1 p10

Trend     3,876   -0.004   0017   0013   0^004   -0.004   -0.011   -0.021

Notes: p10 and p90 are the 10th and 90th percentiles; cv is the coefficient of variation; q1 and q3 are lower and
upper quantiles.

significant parameters estimates in some cases, but have only rather little explanatory power.
This evidence again corroborates our preference regarding interpreting partial
R2s instead of
simple
t -ratios in assessing the relative importance of various factors.

5 Determinants of the dynamics of productive efficiency

Finally, we examined the development of productive efficiency at the firm level. To do so,
the approach outlined in Equation (
1) was easily extended by adding the term θit, where θi
denotes a firm-specific parameter and t is a time trend, t = 1, . . . , Ti . This model allows for
firm-specific (linear) changes in productive efficiency over time (
Kumbhakar, Heshmati and

Table 10: Partial R2 (in Percent): determinants of the dynamics of firm efficiency

Variable

Model I: 1992-2005

Model II: 1999-2005

Df

Partial R '2

Df

Partial R '2

Environmental factors

Industry affiliation

247

22.41*

247

22.60*

Location (district)

413

17.36*

413

17.51*

Year-effects

14

0.4

7

0.001

Firm-specific factors

a) Firm characteristics

Size category

5

0.41

5

0.41

Production share in industry

1

0.001

1

0.005

Number of owners working in the firm

1

0.02

1

0.01

R&D intensity

1

0.17

b) Outsourcing activities

Quota of material inputs

1

0.02

1

0.01

Quota of external contract work

1

0.59*

1

0.56*

Quota of external services

1

0.25

1

0.23

Quota of temporarily employed labor

1

0.005

Quota rents and leases

1

0.02

Sample selection control

Number of years observed

1

0.02*

1

0.10*

Overall R2

36.31

36.51

Sum of all partial R2s

41.45

42.00

Number of observations

3,147

3,116

Notes: Dependent variable: θi, notes of Table 5 apply.

20



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