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on Economics of Strategic Management |
| By: | Elina Berghäll |
| Abstract: | Technical efficiency levels in Finnish ICT manufacturing are established by applying a stochastic frontier model and retrieving Method of Moments and Battese-Coelli efficiency measures to identify both permanent and time-varying efficiency levels, as well as determinants of inefficiency such as R&D investments. The sample is representative of almost half of corporate R&D in Finland in 1990-2003. Results show wide and surprisingly persistent disparities in technical efficiency, with the average firm enjoying only about half of the frontier firm?s technical efficiency level. The rhetoric of Finland featuring on the global technology frontier is based on few firms. Most Finnish firms are constrained to catch-up with the frontier rather than advance it by means of innovation, implying inappropriateness of an innovation focus in policy. The persistence of efficiencies suggests that high risks involved in innovative activity account for only a share of productivity differences. There appear to be considerable permanent gaps between firms related e.g. to managerial and organisational efficiency. |
| Keywords: | Finnish ICT industry, technical efficiency, technology frontier, technology policy and R&D |
| JEL: | O39 L63 O30 |
| Date: | 2006–05–04 |
| URL: | http://d.repec.org/n?u=RePEc:fer:dpaper:389&r=cse |
| By: | Elina Berghäll |
| Abstract: | The relationship between firm size and age relative to technical change and efficiency is examined in a highly innovative and dynamic sector, the Finnish ICT equipment manufacturing industry. A stochastic frontier model is applied to an unbalanced firm level panel over the period 1990?2003. The sample is representative of almost half of corporate R&D in Finland. The Method of Moments and Battese-Coelli efficiency measures are obtained to compare permanent and time-varying efficiency levels. Results show firm age to be relatively insignificant. New firms do not dominate technical change. In contrast, firm size makes a substantial contribution to productivity growth, technical change and efficiency. High elasticity of factor inputs result in, on average, highly increasing returns to scale. These factors point towards growing concentration and capital-intensity, which can be expected to further widen the productivity gap between small and large firms. To survive, smaller firms may need to combine frontier technology adoption with expanding scale, e.g., by mergers, to improve both technical and scale efficiency. |
| Keywords: | ICT industry, total factor productivity, technical change, technical efficiency, R&D elasticity, firm size, firm age |
| JEL: | O39 L63 O30 |
| Date: | 2006–05–04 |
| URL: | http://d.repec.org/n?u=RePEc:fer:dpaper:390&r=cse |
| By: | Juha Kilponen; Torsten Santavirta |
| Abstract: | The relationship between product market competition (PMC) and innovative activity has attracted the attention of many economists lately. In this study we elaborate the theory of Aghion et al. (1997, 2001) of an inverted-U relationship between competition and innovations. We provide a theoretical prediction of a complementary relationship between the incentive effects of PMC and R&D subsidies. We empirically test our complementarity prediction and that of an inverted-U relationship using Finnish firm level data. Our results suggest that the inverted-U relationship is fairly robust to all our innovation measures. We also find that the inverted-U relationship tends to be steeper when also direct R&D subsidies are considered. This result suggests that there exists complementarity between competition and R&D subsidies. |
| Keywords: | Product market competition, Innovation, R&D subsidies |
| JEL: | O31 O10 O30 L10 |
| Date: | 2004–11–15 |
| URL: | http://d.repec.org/n?u=RePEc:fer:resrep:113&r=cse |