The Direct Contribution of FDI to Productivity Growth in Britain, 1997–2008

This paper considers the contribution of foreign‐owned plants and firms to aggregate total factor productivity (TFP) growth in Britain for 1997–2008 using data from the Annual Respondents' Database. The contribution of different sub‐groups is further decomposed to show the role of continuing plants vis‐à‐vis reallocations in output shares. TFP is calculated using system GMM estimation. Taking into account the smaller initial size of the foreign‐owned sector in 1997, foreign‐owned plants contributed relatively more to aggregate productivity growth than UK‐owned plants over the period. This strong performance is mostly the result of reallocations of output shares towards high productivity continuing plants and the opening of high productivity plants.     

Foreign Acquisition,Wages and Productivity

This paper studies the effect of foreign acquisition on wages and total factor productivity (TFP) in the years following a takeover by using unique detailed firm‐level data for Sweden for the period 1993–2002. The paper takes particular account of potential endogeneity of the acquisition decision (for example, due to ‘cherry picking’) by implementing an instrumental variable approach and propensity score matching with difference‐in‐difference estimation. Moreover, in line with the recent literature on firm heterogeneity and trade, this paper allows for the acquisition effect to differ depending on whether the targeted firms were domestic multinational or non‐multinationals before the foreign takeover. This paper also allows for the acquisition effect to differ depending on whether the acquisition is horizontal or vertical. Our results show that foreign acquisition has no effects on overall, skilled or less‐skilled wage growth, either in targeted Swedish MNEs or in targeted Swedish non‐MNEs or if the acquisition was motivated by vertical or horizontal motives. However, the results indicate that both targeted Swedish MNEs and non‐MNEs have better growth in TFP after vertical foreign acquisition only but no such impact from horizontal foreign acquisition.     

The Dynamics of Productivity: A Decompostion Approach Using Distribution Functions

In this paper we use a micro panel data set of Spanish manufacturing firms to measure the contributions of continuing firms and turnover to total factor productivity growth over the period 1990–1997. The paper proposes an approach to the decomposition of productivity growth that is based on the estimation of productivity distributions. We characterize the dynamics of productivity distributions defining counterfactual distributions and using non-parametric methods. The results we obtain indicate that incumbent firms are the main factor contributing to the change in the productivity distribution. Net entry contributes positively to TFP growth. Finally, changes in the relative weights of incumbent, entering and exiting firms produce a counter-cyclical movement of productivity.     

Export Premia and Subcontracting Discount: Passive Strategies and Performance in Domestic and Foreign Markets

This paper contributes to the literature on firms’ productivity and exporting decisions by analysing the role played by organisational choice aspects. Rather than setting up a vertically integrated structure, manufacturers may act as subcontractors in both domestic and foreign markets, and produce to satisfy the requirements of other firms. The predictions that the most productive firms self‐select into exporting, whereas the least productive ones work as subcontractors serving the domestic market only, are tested on a sample of Italian firms observed during the 1998–2003 period. The results of our estimates highlight a ranking of firms consistent with a priori expectations, and provide a clear indication that passive exporters (i.e. those using subcontracting in foreign markets) display lower total factor productivity (TFP) values when compared with direct exporters. Moreover, only the latter category exhibits higher pre‐entry productivity levels and growth rates as well as higher post‐entry TFP growth rates. Such findings are consistent with both the self‐selection hypothesis and the learning‐by‐exporting explanation.     

Productivity growth,technical progress and efficiency change in Spanish retail trade (1995–2004): a disaggregated sectoral analysis

This article analyses productivity growth in Spanish retail stores during the period 1995–2004. It is also interested in analysing the influence of regulation/deregulation processes on the efficiency and productivity of the firms. The analysis is carried out from a disaggregated sectoral perspective at the 4-digit NACE code level. The non-parametric Data Envelopment Analysis approach is used to compute Malmquist productivity indexes. These are decomposed into efficiency change and technical change. Big differences are found in the productivity growth for each sector. First, six retail sectors experienced positive productivity growth, while six saw productivity growth decrease. Second, most sectors experienced technical progress. Third, some sectors improved their efficiency, while others became less efficient. Fourth, the TFP improvements were almost entirely due to technical progress, and only four sectors improved their efficiency. The findings obtained from the analysis of the deregulation of opening hours show two important facts: (i) the differences in the productivity and the efficiency of the firms between sectors, and (ii) the losses /improvements of efficiency of the firms in relation to the effects of the shop opening hours or the lack of adaptation to the environment.     

Evaluating the Contribution of Exporting to UK Productivity Growth: Some Microeconomic Evidence

This study assesses the contribution of exporting activities to aggregate productivity growth in the UK for all market‐based sectors for the period 1996–2004, using a weighted FAME dataset. Based on decompositions of productivity growth, our findings suggest that, overall, exporting firms experience faster productivity growth than non‐exporting firms and therefore contribute more to national productivity growth. In addition, aggregate productivity for exporters benefits from a large contribution from ‘continuing’ firms improving their productivity, as well as exporters that have been taken‐over/merged or started‐up as new firms. In contrast, most of the TFP improvement for non‐exporters is attributable to lower productivity firms exiting, rather than from internal improvements or the productivity‐enhancing impact of new firms.     

Exporting and Economic Performance: Firm‐level Evidence of Spanish Manufacturing

In a previous paper, Delgado, Fariñas and Ruano (2002) report TFP differences between exporters and non‐exporters on the basis of a sample of Spanish manufacturing firms. In this paper, we extend the previous analysis in three directions using a similar data set. First, we investigate additional economic performance differences between exporters and non‐exporters. Second, we measure TFP differences estimating production functions that control for unobserved heterogeneity and simultaneity bias. Third, we explore the self‐selection and learning‐by‐exporting hypothesis as explanations for the greater performance of exporters. With respect to the results, we confirm that many indicators of economic performance such as productivity, size, wages and innovation are greater in exporting firms. Furthermore, TFP differences between exporters and non‐exporters estimated with parametric methods are remarkably similar to those estimated using index numbers. Finally, performance differences and transition patterns between the export market and the domestic market indicate higher performance for entering exporters with respect to non‐exporters at the moment of entry. We find evidence of selection in the entry and the exit side of the export market. One of the basic results that we obtain indicates that after controlling for self‐selection, the productivity growth of entering exporters does not significantly change with respect to non‐exporters. As the evidence we find indicates no systematic changes in performance between non‐exporters and exporters after entry takes place, we do not confirm the learning‐by‐exporting hypothesis.     

Trade in Services and TFP: The Role of Regulation

What determines total factor productivity (TFP) growth in services: is it services trade or services–trade regulation? To respond to this question, we use four indicators of international trade in services since 1990 to 2005, namely foreign direct investment (FDI) inward stock, services imports, domestic sales of foreign affiliates (FATS) and FDI inflows, to examine what type of services trade forms a direct determinant. Subsequently, we analyse what type of sector‐specific regulation has played an inhibiting effect on services TFP growth. Such analysis contrasts with former studies in which mainly factor inputs and economy‐wide regulation are used to explain services TFP. This paper provides evidence that neither trade nor entry barriers are robust determinants to explain cross‐country differences. Instead, regulations on operational procedures affecting the variables costs structure of the firm seem to play a more important role in explaining TFP growth between countries, particularly in combination with information and communication technology (ICT) capital.     

(Not So) Easy Come, (Still) Easy Go? Footloose Multinationals Revisited

The central question of this paper is to test whether multinational firms (MNFs) are more likely to exit the local market than domestic firms. Using firm‐level data for Belgium, we estimate a random effects probit model taking into account the endogeneity of firm size, total factor productivity (TFP) and sunk costs in firm exit. Our results highlight two features of the ‘footloose’ nature of MNFs. First, controlling for firm and sector characteristics, the exit probability of MNFs is larger than that of domestic firms. Second, MNFs have a lower sensitivity to TFP and size than do domestic firms. This means that an improvement in economic performance on the local market will not prevent a multinational from closing its local plant as much as it would for a domestic firm.     

Assessing the Impact of Changing Economic Environment on Productivity Growth: The Case of the Spanish Dairy Processing Industry

This article analyzes the productivity growth of the Spanish dairy processing industry from 1996 till 2011, which concerns the period of increased EU regulation regarding food safety as well as economic crisis. Data envelopment analysis is used to compute the Malmquist index and its components. The results suggest that productivity on average declined during the period under investigation. The decomposition of the Malmquist index finds that technical regress contributed to productivity decline despite improvements in technical and scale efficiencies. Our results also suggest that food safety regulations did not have a negative impact on productivity growth. Technical change and scale efficiency change made significant negative contributions to productivity growth in the period under crisis, whereas firms significantly improved their technical efficiency in that period.     

Internationalisation and Economic Performance of Enterprises: Evidence from Polish Firm‐level Data

This article provides evidence on the relative performance of internationalised firms using Polish firm‐level data, spanning the period 1996–2005 and covering all medium and large enterprises. We distinguish between three modes of internationalisation: foreign direct investment, exporting and importing of capital goods. Our results point strongly at the superior performance of foreign affiliates vs domestic firms, exporters vs non‐exporters, and importers vs non‐importers: internationalised firms are larger, more capital intensive, pay higher wages and are more productive than purely domestic firms. Foreign ownership is the strongest factor accounting for gains from internationalisation. The premia from exporting are substantially lower, though also significantly positive. The performance of capital goods importers is also higher compared to non‐importers and is to some extent related to their involvement in other types of international activity. The results are robust to the choice of specification and productivity estimator. The analysed enterprises recorded a sizeable and broad‐based productivity improvement over the period under consideration. Not only the initial levels of productivity of exporters, importers and foreign affiliates were on average significantly higher that those of their non‐internationalised counterparts, but they also recorded faster productivity gains (manifested in increasing productivity premia), so that the discrepancies grew even larger. We also perform the analysis of productivity spillovers from internationalised firms onto own, downstream and upstream sectors. We find evidence of significant horizontal and backward spillovers from all three types of international activity. Our results suggest that trade externalities are rather of a horizontal nature, while those related to foreign direct investment operate mainly via backward linkages.     

Entry to foreign markets and productivity: Evidence from a matched sample of Turkish manufacturing firms

We examine the effects of international trading activities of firms on creating productivity gains in Turkey by using a recent firm-level data set over the period 2003–2010. We establish treatment models and investigate the productivity improvements of firms through trade by using propensity score matching techniques together with difference-in-difference estimates. Three different groups of treatment are constructed: (1) firms that are involved only with import activities, (2) firms that are involved only with export activities and (3) firms that are involved with both export and import activities. The results of the study suggest that both exporting and importing have positive significant effects on total factor productivity (TFP) and labour productivity (LP) of firms. Importing is found to have a greater impact on productivity of firms compared to exporting. Further, two-way trade is found to have more significant effects than those of one-way trade on firm productivity. Finally, our results indicate that international trade has greater impact on LP rather than TFP of firms.     

Technical efficiency and productivity growth of entrant firms in the retail sector in Spain

This paper analyses efficiency and productivity growth in relation to size, and age and for both entrant and incumbent firms using a birth cohort approach for the period 1995–2003 for two sectors, non-specialized shop (521) and specialized shop (524) three-digit NACE. On the one hand, our results indicate the existence of statistically significant differences among entrant and incumbent firms by size. Also, we found differences according to the start up size in relation to membership of the birth cohort and activity sectors. On the other hand, productivity growth shows that, in general, the larger entrants in the non-specialized sector obtained higher productivity than did small firms. This phenomenon was not observed in the specialized sector, where firms worsened in productivity in most of the cohorts and we did not find significant differences in productivity growth between large and small firms. Efficiency changes tend to be a positive contributor to total factor productivity change, but technical change tends to be a negative contributor for both sectors. A deeper analysis of the efficiency changes (catching up) has shown that these improvements are generally attributed to pure technical efficiency and the scale.     

Detecting learning‐by‐exporting effects on firms' productivity distribution by accounting for heterogeneous macrofactors and panel attrition

This paper aims to verify the presence of the learning‐by‐exporting effect on total factor productivity growth. The study starts, as is typical in this context, by addressing the pre‐entry selection bias at firm level but differs from the literature by focusing on the distribution of the outcome and considering the presence of the different influences of macroeconomic factors on exporters and non‐exporters. Additionally, the paper addresses the panel attrition, a current source of estimation bias in longitudinal studies. The analysis is based on a panel of Italian manufacturing firms in the 1998–2007 period. We design an experiment by aligning and pooling cohorts of firms that allow us to obtain a sufficiently large group of firms entering the international market. Our results show that internationalisation affects firms' productivity and that the effect is heterogeneous over total factor productivity distribution and larger for the firms at the bottom section of the distribution itself. Furthermore, we observe that the learning‐by‐exporting effect may be confounded without (a) considering that domestic and exporter firms may afford heterogeneous demand cycles and (b) managing the dropout of some firms from the panel.     

Sources of TFP growth in the Malaysian Islamic banking sector

This paper attempts to empirically analyse productivity changes of the Malaysian Islamic banking sector during the period of 2001–2004 by applying the non-parametric Malmquist productivity index method. During the period of study, the empirical findings suggest that the Malaysian Islamic banking sector has exhibited productivity progress during the earlier years before declining during the latter years. The results suggest that foreign banks have exhibited higher productivity levels compared with their domestic counterparts during the earlier years, while the domestic banks’ productivity levels were relatively higher compared with the foreign banks during the latter years.     

Domestic vs. International Spillovers: Evidence from Swedish Firm Level Data

This paper investigates the association between total factor productivity growth and the R&D expenditures of Swedish manufacturing firms in the presence of domestic- and international R&D spillovers. The paper assumes that the principal channel of transmission of new technology is through I/O relations. Econometric evidence suggests that international as well as domestic inter-industry R&D spillovers are important determinants of firms’ productivity growth in the long run. The R&D spillovers generated within the industry and following I/O links seem to be of minor importance in explaining productivity growth. It seems likely that within-industry productivity spillovers follow other channels than I/O flows, such as horizontal spillovers through copying of new products and processes, or labour turnover. The use of a convergence parameter is one way to check for such within-industry technology flows. Our results indicate that a catch-up process exists by which the non-frontier firms in the Swedish manufacturing sector absorb knowledge spillovers from the leading firms in the industry. Finally, a firm’s own R&D efforts are found to be more or less positively correlated with the TFP growth, maybe the contribution from R&D efforts in some sense are underestimated.     

Imported Intermediates,Absorptive Capacity and Productivity: Evidence from Ghanaian Manufacturing Firms

This paper analyses whether the use of imported intermediates improves productivity using firm‐level panel data of manufacturing firms in Ghana covering the period between 1991 and 2002. This includes examining the importance of absorptive capacity (ABC) in enhancing the productivity gains from imported intermediates. We propose lagged relative productivity as a new measure of ABC. For any given period, ABC is defined as the natural logarithm of a firm's total factor productivity (TFP) in the previous period relative to the firm's initial TFP. An alternative measure of ABC considers real value added per worker in lieu of TFP. Overall, we find that firms with high levels of ABC derive productivity gains from the contemporaneous and prior use of imported intermediates, particularly for firms operating in the input‐intensive industries. Our findings are robust to different specifications of the base model and different estimation techniques.     

Investment History and Market Orientation Effects in the TFP–FDI Relationship1

This paper examines the robustness of previous stochastic dominance tests that find significant total factor productivity (TFP) heterogeneity between firms that export abroad and multinational enterprises (MNEs). We extend this literature by focusing on how ‘within‐MNE’ heterogeneity affects the extent to which one can identify the TFP threshold in the exporter–MNE TFP relationship. Within‐MNE heterogeneity is established by determining both the number and location of the foreign affiliates established by each MNE. In this way, we separate single‐affiliate MNEs from those with multiple affiliates, as well as analyse the role played by vertical FDI, a topic typically ignored in previous stochastic dominance tests of the Helpman et al. (2004, American Economic Review, 94, 300–16) hypothesis. Our empirical tests employ Japanese firm‐level FDI and TFP data for the period 1975–2000. Using Kolmogorov–Smirnov tests to determine stochastic dominance, we find significant TFP heterogeneity within the MNE group based on investment history and affiliate geographic location. While our results confirm the standard HMY three‐tiered classification to exist for Japanese firms, exporter–MNE ‘between‐group’ TFP heterogeneity is sensitive to the ‘within‐MNE’ investment history heterogeneity. We note that single‐ and two‐affiliate MNEs are statistically more similar to exporting firms than to MNEs with greater foreign affiliate totals. This shows the exporter–MNE TFP threshold to be not as explicit as Helpman et al. (2004, American Economic Review, 94, 300–16) suggest. In fact, our results allow us to identify the MNE‐side width of Girma et al.’s (2005, Economic Letters, 83, 317–24) ‘uncertainty region’ surrounding this threshold. Finally, we also find a strong TFP–market orientation relationship exists where the most productive firms follow complex integration strategies, lesser TFP firms do horizontal FDI, and the least productive MNEs do vertical FDI.     

Efficiency and capital adequacy in Taiwan banking: BCC and super-DEA estimation

In this study the researchers adopt two DEA methods – Banker-Charnes-Cooper and Super Efficiency – to investigate whether a bank's technical efficiency is significantly different when capital adequacy (risk) is specified compared with when capital adequacy (risk) is not specified. The information is obtained from 46 Taiwanese banks for the period 2000 to 2002. The Malmquist total factor productivity (TFP) index is employed to measure the impact of productivity change on the panel data. The empirical results from the DEA approach are summarized as follows: (1) Capital adequacy is proven to be an influential factor in evaluating the efficiency of banks. (2) The average efficiency scores of banks with high capital adequacy (>8%) are significantly higher than those of banks with lower capital adequacy (<8%). (3) The efficiency scores of banks with high risk capital requirement (above the average) are higher than those of banks with lower risk capital requirement (under the average). (4) Banks with both high capital adequacy and high risk capital requirement are superior in performance than all the other banks, while banks with both low capital adequacy and low-risk capital requirement performance are the worst by contrast. (5) Based on the Malmquist total TFP index, we find that bank productivity has not increased.     

Does Exporter Turnover Contribute to Aggregate Productivity Growth? Evidence from Malaysian Manufacturing

Malaysia’s economic success is to a significant extent underpinned by its export‐oriented manufacturing sector. The sector has a large foreign presence, with MNCs attracted by the open trade and investment regime, and FDI‐friendly policies. Using unpublished manufacturing census data for 2000 and 2005, we apply the methodology by Foster et al. (1998) to decompose productivity growth. The analysis shows that exporters were more productive than domestic‐oriented establishments, and were distinctly more competitive. The empirical evidence also shows that establishment turnover is important in boosting productivity growth. In particular, we find that turnover of exporters made a larger contribution to aggregate productivity growth compared with domestic‐oriented establishments during the period from 2000 to 2005. Surviving establishments (those that operated in both years), on the other hand, made a negative contribution. It is noteworthy that entrants to export markets were more productive than surviving non‐exporters and even surviving exporters. Exiters from export markets or ‘export failures’, on the other hand, were less productive than continuing exporters. Given the importance of turnover to productivity growth, the government should ensure unrestricted entry to the export sectors for both foreign and domestic investors. Continuing with pro‐FDI policies is also important, given the keener global competition.