Downsizing in the German chemical manufacturing industry during the 1990s. Why is small beautiful? |
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Authors: | Oleg Badunenko |
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Institution: | (1) DIW-Berlin, 10108 Berlin, Germany |
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Abstract: | The German chemical manufacturing industry experienced major downsizing between 1992 and 2004, with the average size of firms
shrinking by nearly half during this period. This study uses modern frontier efficiency analysis to investigate the determinants
of this downsizing. Based on reliable census data, the results of this analysis suggest that firms were not primarily concerned
with improving technical efficiency, but with establishing an optimal scale of production. The proportion of scale-efficient
firms has been persistently increasing, and downsizing is found to be a rational conduct because all scale-inefficient firms
have continually operated under the decreasing returns portion of technology. |
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