Firm Productivity Growth and Competition

Mogens Dilling-Hansen, Tor Eriksson (), Erik Strøjer Madsen and Valdemar Smith ()
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Mogens Dilling-Hansen: University of Aarhus
Erik Strøjer Madsen: Danish Institute for Studies in Research and Research Policy

No 1997-22, CIE Discussion Papers from University of Copenhagen. Department of Economics. Centre for Industrial Economics

Abstract: It is a commonplace to assume that competition within an industry reduces firms’ profit margins and production inefficiency and increases the effort and resources firms spend on innovations. Although theoretically there are good reasons to believe that competition will increase the productivity of the firms, there is very little empirical evidence on this issue. In this paper we study the productivity in Danish firms and the factors affecting their productivity. The study is based on a longitudinal sample of a little over 2,800 firms in the manufacturing sector. We investigate how total factor productivity at the firm level is affected by the number of competitors in the product market, the level of profit in the industry, the amount of debt service payments and the type of ownership.

JEL-codes: D24 L11 (search for similar items in EconPapers)
Date: 1997-12
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