Understanding multilevel interactions in economic development

Micheline Goedhuys and Martin Srholec

No 2010-003, MERIT Working Papers from United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT)

Abstract: National framework conditions mediate the effect of technological capabilities of firms on their productivity. Although this has been recognized in the literature for a long time, a quantitative test that explicitly considers this hypothesis has been lacking. Using a World Bank datasets of about 19,000 firms in 42 countries, most of which are developing, we estimate a multilevel production function with effects of firm's technological capabilities nested in the national framework conditions. Our results confirm that various facets of firm's technological capabilities and national economic, technological and institutional conditions influence total factor productivity of firms. Furthermore, we find that the effects of the national conditions and firm's technological capabilities are closely intertwined with each other. Adherence to international standards, formal training of workers and access to technology through foreign ownership make more difference for productivity of firms in less developed countries, while R&D capabilities on the contrary boost significantly more performance of firms in countries at the technological frontier. Different features of the national framework are shown to be responsible for this.

Keywords: Productivity; innovation; technological capability; institutions; multilevel modeling (search for similar items in EconPapers)
JEL-codes: C39 D24 O12 O14 O31 O43 (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Working Paper: Understanding multilevel interactions in economic development (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:unm:unumer:2010003

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