ARE LARGE INNOVATIVE FIRMS MORE EFFICIENT?

  • Rosario SÁNCHEZ-PÉREZ University of Valencia, Spain
  • M. Ángeles DÍAZ-MAYANS University of Valencia, Spain

Abstract

Size is one of the factors that condition the managerial organization of the firms and their efficiency and productivity. Moreover size has been found a highly significant variable in explaining differences in firm’s innovative activities and the returns of R&D expenditures, and it is a well-established connection between productivity and innovative activities.


This paper analyses the relationship between innovative activities and size and their effect over firms’ technical efficiency and then over their productivity. The analysis takes, also, into account other variables that could affect the relationship between productivity and innovative activities: industrial sector, market structure, or firms’ financial conditions. We use a micro panel data set of Spanish manufacturing firms, during the period 2004–2009, to simultaneously estimate a stochastic frontier production function and the inefficiency determinants. The data source is published in the Spanish Industrial Survey on Business Strategies (Encuesta sobre Estrategias Empresariales, ESEE), collected by the Fundación SEPI. Our results show that innovative firms are more efficient than non-innovative firms; and that small and medium-sized firms’ tent to be more efficient than large firms are.

References

[1] Acs, Z.J., Audretsch, D.B. and Feldman, M.P. (1994). R&D Spillovers and Recipient Firm Size. The Review of Economics and Statistics, MIT Press, 76(2): 336-340.
[2] Aigner, D., Lovell, and Schmidt, P. (1977). Formulation and estimation of stochastic frontier production function models. Journal of Econometrics, 6: 21-37.
[3] Audretsch, D. (2002). The Dynamic Role of Small Firms: Evidence from the U.S. Small Business Economics, 18: 13–40.
[4] Battese, G.E. and Coelli, T.J. (1995). A model for technical inefficiency effects in a stochastic frontier production function for panel data. Empirical Economics, 20: 325-332.
[5] Caves, R.E. and Barton, D.R. (1990). Efficiency in US manufacturing industries. MIT Press, Cambridge, MA.
[6] Caves, Richard E. (1992). Industrial Efficiency in six nations. MIT Press, Cambridge, MA.
[7] Cohen, W. M. and Klepper, S. 1996. Firm Size and the Nature of Innovation within Industries: The Case of Process and Product R&D. Review of Economics and Statistics, 78: 232–243.
[8] Crépon, B., Duguet, E. and Mairesse, J. (1998). Research, innovation, and productivity an econometric analysis at the firm level. NBER Working Paper 6696.
[9] Díaz-Mayans, M. A. and Sánchez, R. (2004). Temporary employment and technical efficiency in Spain. International Journal of Manpower, 25(2): 181-194
[10] Díaz-Mayans, M. A. and Sánchez, R. (2008). Firm size and productivity in Spain: a stochastic frontier analysis. Small Business Economics, 30: 315-323.
[11] Dilling-Hansen, M., E.S. Madsen and Smith, V. (2003). Efficiency, R&D and ownership-some empirical evidence. International Journal of Production Economics 83: 85-94.
[12] Fariñas, J.C. and Jaumandreu, J. (2004). Diez años de encuesta sobre estrategias empresariales (ESEE). Economía Industrial, 329: 29-42.
[13] Farrell, M.J. (1957). The measurement of productive efficiency. Journal of Royal Statistical Society, 120: 251-281.
[14] Geroski, P.A. (1998). An Applied Econometrician’s View of Large Company Performance. Review of Industrial Organization, 13: 271-293.
[15] Green, A. and Mayes, D.G. (1991). Technical efficiency in manufacturing industries. The Economic Journal, 101: 523-538
[16] Griliches, Z. (1979). Issues in Assessing the Contribution of Research and Development to Productivity Growth. Bell Journal of Economics, The RAND Corporation, 10(1): 92-116.
[17] Hay, D. and Li, G. (1997). The efficiency of firms: what difference does competition make? The Economic Journal, 107: 597-61.
[18] Hall, B.H. and Mairesse, J. (1995). Exploring the relationship between R&D and productivity in French manufacturing firms. Journal of Econometrics, 65(1): 263-293
[19] Huergo, E. and Jaumandreu, J. (2004a). Firms’ age, process innovation and productivity growth. Journal of Industrial Organization, 22: 541-559.
[20] Huergo, E. and Jaumandreu J. (2004b). How does probability of innovation change with firm age?. Small Business Economics, 22: 193–207.
[21] Jondrow, J., Lovell, K., Materov, I.S., Schmidt. P. (1982). On the estimation of technical inefficiency in the stochastic frontier production function model. Journal of Econometrics, 19: 233-238.
[22] Klepper, S. (1996). Entry, Exit and Innovation over the Product Life Cycle. American Economic Review, 86: 562–583.
[23] Kumbhakar, S.C., Ortega, R., Potters, L., and Voigt Vivarelli M. (2011). Corporate R&D and firm efficiency: evidence from Europe’s top R&D investors. Journal of Productivity Analysis, 37: 125-140.
[24] Lovell, K. (1993). Production frontiers and productive efficiency. Fried, Lovell, and Schmidt, Eds. The Measurement of Productive Efficiency: Techniques and Applications, Oxford University Press.
[25] Martin-Marcos, A and Suárez-Galvez, C. (2000). Technical efficiency of Spanish manufacturing firms: a panel data approach. Applied Economics, 32: 1249-1258.
[26] Ornaghi, C. (2006). Spillovers in product and process innovation: Evidence from manufacturing firms. International Journal of Industrial Organization, 24: 349–380.
[27] Patibandla, M. (1998). Structure, organizational behavior, and technical efficiency: The case of an Indian industry. Journal of Economic Behavior and Organization, 34: 419-434.
[28] Schumpeter, J.A. (1942). Capitalism, Socialism and Democracy. New York, Harper and Brothers.
[29] Winter, S.G. (1984). Shumpeterian competition in alternative technological regimes. Journal of Economic Behavior and Organization, 5: 287-320.
Published
2017-06-14
How to Cite
SÁNCHEZ-PÉREZ, Rosario; DÍAZ-MAYANS, M. Ángeles. ARE LARGE INNOVATIVE FIRMS MORE EFFICIENT?. Theoretical and Practical Research in the Economic Fields, [S.l.], v. 4, n. 1, p. 89-96, june 2017. ISSN 2068-7710. Available at: <https://journals.aserspublishing.eu/tpref/article/view/1178>. Date accessed: 23 jan. 2022.