A quantitative explanation of the low productivity in South–Eastern European economies: the role of misallocations

It is well known that southeast Europe is the least developed area in Europe. Using a methodology based on the idea of heterogeneous firms, this paper studies the degree to which firm heterogeneity and resource misallocation can explain the lower TFP in southeast Europe. The results show a significant degree of heterogeneity and resource misallocation, although the results are sensitive to the calibration used. There is evidence that firm-level productivity depends on firm size, while taxation negatively influences it. There is also some evidence that foreign-owned firms are more competitive, as are exporting firms. Results are generally robust across the various specifications used, but less so relative to the measure of productivity used. Additional evidence suggests that infrastructure-related obstacles as well as institutional instability drive the output distortion, while no factor is underlined as a significant driver of capital distortions, suggesting the need for better data sources for the latter.     

Trade and productivity: Self-selection or learning-by-exporting in India

Recent literature tried to explain the Indian growth miracle in different ways, ranging from trade liberalization to industrial reforms. Using data on Indian manufacturing firms, this paper analyzes the relationship between firm's productivity and export market participation during 1991–2004. While it provides evidence of the self-selection hypothesis by showing that more productive firms become exporters, the results do not show that entry into export markets enhances productivity. The paper examines the explanation of self selection hypothesis for total factor productivity differences across 33,510 exporting and non-exporting firms. It uses propensity score matching to test the learning-by-exporting hypothesis. In line with the prediction of recent heterogeneous firm models of international trade, the main finding of the paper is: more productive firms become exporters but it is not the case that learning by exporting is a channel fuelling growth in Indian manufacturing.     

Foreign ownership wage premia in emerging economies

In this article we examine the relationship between wages, labour productivity and ownership using a linked employer–employee dataset covering a large fraction of the Czech labour market in 2006. We distinguish between different origins of ownership and study wage and productivity differences. The raw wage differential between foreign and domestically‐owned firms is about 23 percent. The empirical analysis is carried out on both firm‐ and individual‐level data. A key finding is that industry, region and notably human capital explain only a small part of the foreign–domestic ownership wage differential. Both white and blue collar workers as well as skilled and unskilled employees obtain a foreign ownership wage premium. Foreign ownership premia are more prevalent in older and less technologically advanced firms. Joint estimation of productivity and wage equations show that, controlling for human capital, the difference in productivity is about twice as large as the wage differential. Overall, results indicate that the international firms share their rents with their employees.     

Firms' Technological Trajectories and the Creation of Foreign Subsidiaries

Multinational firms are traditionally considered as firms possessing some technological lead and which are exploiting this proprietary advantage in international markets, but a growing literature has been arguing that multinational firms set up foreign subsidiaries not only as a means to exploit their own technology but also to enrich it. This paper provides some empirical evidence for this. The aim of the paper is to assess the effects of the creation of foreign subsidiaries on firms' technological trajectories.The idea is that by setting up subsidiaries in foreign countries, multinational firms can achieve some form of reverse technology transfer that can be expected to affect their technological trajectories.The empirical investigation uses data from 1992 to 1996 for a sample of 2185 Italian manufacturing firms. Results support the view that the creation of manufacturing subsidiaries has a positive impact on firms' productivity trajectories and this positive impact is greater when subsidiaries are created in regions where knowledge spillovers are expected to be relatively higher, such as the US.     

Productivity effects of international outsourcing: evidence from plant-level data

Abstract.  We investigate the impact of international outsourcing on productivity using plant-level data for Irish manufacturing. Specifically, we distinguish the effect of outsourcing of materials from services inputs. Moreover, we examine whether the impact on productivity is different for plants being more embedded in international markets through exporting or being part of a multinational. Our results show robust evidence for positive effects from outsourcing of services inputs for exporters, either domestic or foreign owned. By contrast, we find no statistically significant evidence of an impact of international outsourcing of services on productivity for firms not operating on the export market.     

Disentangling barriers to internationalization

Abstract. Recent literature on multinational firms has focused on low productivity as a barrier to the internationalization of firms. But labour market frictions or financial constraints may also hamper internationalization. In order to assess the importance of these barriers, we present new empirical evidence on the extensive and intensive margin of exports and foreign direct investment (FDI) based on micro‐level data of German firms. First, we find a positive impact of firm size and productivity on firms’ international activities. Second, labour market frictions can constitute barriers to foreign activities. Third, self‐reported financial constraints have no impact on firms’ internationalization decisions. JEL classification: F23, G2     

Development of internal resources and capabilities as sources of differentiation of SME under increased global competition: A field study in Mexico

This paper draws on the resource-based view of the firm and contributes to our understanding of how the development of internal resources and capabilities in SMEs can provide sources of competitive advantages in the international arena and improve their business performance.This research found statistical evidence to suggest that business performance measured by growth rate, efficiency, productivity and shareholder's financial returns, is positively related with the development of internal capabilities such as soft technology (methods and processes that support the firm) and hard technology (externally acquired equipment, in-house development of machinery and innovation in raw materials) and a strategy of continuous improvement, innovation and change.A number of relevant contributions are proposed in this piece of research that expands our understanding of how SMEs can compete in the international context: (1) firms whose explicit business strategy emphasizes innovation and knowledge creation have been able to successfully participate in global contexts; (2) even though financial resources are important for a firm to leverage performance it was found that development of internal capabilities has been more important than limited financial resources in order to develop competitive advantages to compete with larger and multinational competitors; (3) results of this research support the proposition that from an associational economy perspective the development of a geographical region or country should be an interaction among a number of constituents namely government policies, the firms themselves and universities and research centers among others.     

Do domestic firms learn to export from multinationals?

Attracting inward investment is a major preoccupation of policymakers worldwide, and a wide range of instruments, including direct subventions, are deployed to attract multinational enterprises (MNEs). Intervention is predicated on the assumption that there are direct productivity spillovers associated with the presence of MNEs and the policy of attracting them is targeted at capturing these externalities. Yet robust evidence on direct spillovers is hard to find. An underexplored indirect channel for productivity spillovers is via exports. Exporting firms are more productive than nonexporting firms. Thus, if the presence of MNEs results in more indigenous firms exporting, an indirect productivity spillover will result. In this paper, we identify possible transmission mechanisms for export spillovers and test for their existence on a large panel of firms in the UK. Our results confirm positive spillover effects from MNEs on the decision to export of UK-owned firms as well as on their export propensity.     

Exports versus FDI in German Manufacturing: Firm Performance and Participation in International Markets

Recent theoretical work has been able to explain how even within narrowly defined industries, firms can exhibit heterogeneous degrees of participation in international commerce. Differences in productivity between firms are the principal explanation offered by theory to explain heterogeneity with respect to international commerce. In particular, theory predicts that the least productive firms will produce for the domestic market only, while better performers engage in export activities, and the top firms establish foreign subsidiaries. This paper presents an empirical test of the relationship between productivity and patterns of international trade and production. Using German firm‐level data from 1996 to 2002, we test the predicted rank ordering of productivity according to firms’ trade pattern by examining the distribution functions of the three subsets of firms for stochastic dominance. Our results are generally consistent with the predictions from theory, and document significant productivity differences according to trade patterns.     

MARKET ACCESS,INVESTMENT, AND HETEROGENEOUS FIRMS*

This article presents a model of international trade in which heterogeneous firms can expand through capital acquisitions. I show that demand elasticities are a crucial element in predicting which firms invest, in what location, and for what reason. High‐productivity firms, who tend to sell goods at a low elasticity, invest for market access (tariff jumping). Middle productivity firms, who tend to sell at a higher elasticity, invest for productivity improvement. The relative value of trade costs dictates which incentive is larger. In equilibrium, trade liberalization can reduce aggregate productivity by reducing an important source of investment demand: foreign firms.     

Labor productivity of small and large manufacturing firms: the case of Taiwan

This work studies the factors influencing the labor productivity of small and medium-sized enterprises (SMEs) and large firms using Taiwan as a case study. A special emphasis is placed on two possible international channels: exports and foreign direct investment (FDI). Different from conventional studies, we employ the two-stage switching regressions to correct the firm-size effect on labor productivity and estimate labor productivity for SMEs and large firms. The main findings are as follows. First, the estimates of the selectivity variable are statistically significant for both SMEs and large firms, supporting the hypothesis of correcting the effect of firm-size truncation. Second, while a larger trade intensity significantly increases the labor productivity of SMEs, it deteriorates significantly that of large firms. Third, FDI enhances the labor productivity of SMEs internally, whereas it has a negative spillover on that of other small and large firms in the industry. While the first outcome lends supports to the role of self-selection, the remaining stands in sharp contrast to conventional wisdom.     

Regional variations in exporters’ productivity premium: Theory and evidence

The international trade literature confirms that the average productivity of exporters is higher than that of nonexporters, while economic geography studies establish that urban firms tend to be more productive than rural ones. By introducing region‐specific transportation costs in a Melitz‐type heterogeneous‐firm trade model, the theory predicts that the minimum threshold productivity level for export is higher but that for survival by serving the local market is lower in the periphery region than in the core. Using Japanese plant‐level panel data, we find evidence supporting the theoretical prediction that exporters in the peripheral regions, especially those distant from the core, have large productivity premiums.     

Cross‐border Mergers and Greenfield Foreign Direct Investment

This paper presents a model of international trade and foreign direct investment (FDI), where FDI is comprised of greenfield FDI and mergers and acquisitions (M&A). In a monopolistically competitive environment merging firms do not reduce competition. Mergers are motivated by efficiency gains and transfer of technology. Following empirical evidence, greenfield investors are modeled as more productive than M&A firms, which are in turn more productive than exporters. The model has two symmetric countries and generates two‐way flows of both M&A and greenfield FDI. Trade liberalization makes more firms choose greenfield FDI over M&A and leads to lower productivity and welfare.     

Sources of productivity differentials in manufacturing in post-transition urban South-East Europe

The paper analyses the effects of urbanization and localisation economies on manufacturing firms’ productivity across urban landscapes in post-transition South-East European (SEE) countries. Fixed-effects panel data estimations on a large sample of firms show that the factors accounting for productivity advantages of manufacturing firms in urban post-transition SEE are related to the firms and to the environment in which these firms operate. Firms located in diversified cities benefit from a productivity premium generated in this type of agglomeration, while no evidence was found that the relative specialization across industries has any effect on firm productivity levels.     

Who Benefits from Foreign Direct Investment in the UK?

The presumed higher productivity of foreign firms and resulting spillovers to domestic firms has led governments to offer financial incentives to foreign firms. We investigate if there is any productivity or wage gap between foreign and domestic firms in the UK and if the presence of foreign firms in a sector raises the productivity of domestic firms. Our results indicate that foreign firms do have higher productivity than domestic firms and they pay higher wages. We find no aggregate evidence of intra‐industry spillovers. However, firms with low productivity relative to the sector average, in low‐skill low foreign competition sectors gain less from foreign firms.     

Schumpeterian and semi‐endogenous productivity growth explanations

This paper examines the nature and sources of productivity growth in South African manufacturing sectors, from an international comparative perspective. On panel data estimations, we find that the evidence tends to support Schumpeterian explanations of productivity growth for a panel of countries including both developed and developing countries, and a panel of South African manufacturing sectors. By contrast, semi‐endogenous productivity growth is supported for a panel of OECD (Organisation for Economic Cooperation and Development) manufacturing sectors. However, we also report evidence that suggests that sectors are not homogeneous. For this reason, time series evidence may be more reliable than panel data. Time series evidence for South Africa suggests that prospects for the sustained productivity growth associated with Schumpeterian innovation processes, is restricted to a narrow set of sectors. For the OECD manufacturing sectors, both semi‐endogenous and Schumpeterian growth finds support. Schumpeterian growth is present for a larger number of sectors than for South Africa, and is most prevalent in the North American economies.     

在位企业如何开拓新技术市场:商业模式与组织身份共演视角

新技术带来了新机遇,在位企业能否成功把握成为生存关键。采用单案例研究方法,以软件企业为案例研究对象,探索在位企业如何通过商业运营实现新技术市场开拓。研究发现:(1)商业模式与组织身份共演过程中,涌现了惯性思路-身份转移、整合思路-身份延伸、修补思路-身份增补3种演化形式;(2)战略导向变化是商业模式与组织身份演化的动因,出现了由内向外、混合导向和由外向内3种变化;(3)演化中组织身份匹配于商业模式,表现为嫁接匹配、重塑匹配和扩充匹配3种机制。扩展了在位企业应对技术变化的研究视角,丰富了组织身份的动态变化研究,深化了商业模式与技术发展间关系的研究,可为在位企业商业实践提供借鉴。     

The impact of hiring top workers on productivity: what is the role of absorptive capacity?

We examine the heterogeneous productivity impacts of hiring top workers on small and medium-sized enterprises, exploiting matched employer–employee panel data and employing within-firm as well as matching and difference-in-difference estimators. The results provide robust evidence that the productivity impact is stronger for firms with higher absorptive capacity. Technological laggards within an industry benefit more strongly from hiring top workers if their workforce is more well-educated.     

Productivity change and externalities: empirical evidence from Hungary

This paper contributes to the analysis of the impact of externalities on the host country’s total factor productivity by taking into account different dimensions of spillover effects. Namely, engagement in exporting and foreign ownership is generally perceived as being beneficial to individual firms and the economy as a whole. The approach used in the current research accounts for different internal as well as external factors that individual firms face and evaluates the effect on changes in productivity, technology as well as the efficiency of domestic firms. The empirical analysis focuses on Hungary. While the country leads the group of post-socialist countries in the amount of attracted foreign direct investments (FDI) the effect of this policy on the economy remains unclear. The research finds that different externalities play a different role in productivity, technological and efficiency change in different types of firms and sectors of the economy.     

Employee Profit-sharing and Labor Extraction in a Classical Model of Distribution and Growth

This article sets out a classical model of economic growth in which the distribution of income features the possibility of profit-sharing with workers, as firms choose periodically between two labor-extraction compensation strategies. Workers are homogeneous with regard to labor power, and firms choose to compensate them with either only a conventional wage or a share of profits on top of this conventional wage. Empirical evidence shows that labor productivity (i.e. labor extraction) in profit-sharing firms is higher than labor productivity in non-sharing firms. The frequency distribution of labor-extraction employee compensation strategies and labor productivity across firms is time-variant, being driven by satisficing imitation dynamics from which we derive two significant results. First, heterogeneity in labor-extraction compensation strategies across firms, and hence earnings inequality across workers can be a stable long-run equilibrium outcome. Second, although convergence to a long-run equilibrium may occur with either a falling or increasing proportion of profit-sharing firms, the share of net profits in income and the rates of net profit, capital accumulation and economic growth nevertheless all converge to the highest possible long-run equilibrium values.