Total Factor Productivity and Spillover Effects:Frontier and Laggard Firms’ Dynamics"

Okan Akarsu

Working Papers from Research and Monetary Policy Department, Central Bank of the Republic of Turkey

Abstract: In this paper, I explore the spillover effects of frontier firms on other firms in Türkiye, using a detailed administrative dataset with firm-level data on balance sheets, inter-firm transactions, and employment. I review key production function estimators, evaluate their assumptions and performance using a large dataset of Turkish firms, and apply estimated productivity to identify frontier firms and assess their influence on laggard firms' performance. Additionally, I contribute to the empirical literature by exploring the spillover and network effects of frontier firms on laggard firms, as well as examining the productivity convergence of laggard firms to frontier firms. The analysis reveals three key findings: (i) Frontier firms generate positive spillover effects within sectors, which enhance sales, employment, exports, and asset growth among laggard firms; (ii) detailed firm-to-firm invoice data reveals that a higher share of frontier firms in a firm’s network significantly boosts investment, net sales, and productivity growth; and (iii) laggard firms show faster productivity growth, with substantial variation across firm types and industries.

Keywords: Spillover effect; Frontier firm; Total factor productivity; Production function estimation; Semiparametric estimator; Laggard firm dynamics (search for similar items in EconPapers)
JEL-codes: C13 C14 C23 D24 D40 (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-ara, nep-cse, nep-net, nep-sbm and nep-tid
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