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Technical Efficiency in an RD Intensive Industry: Finnish ICT Manufacturing

Pii Berghäll ()

No 389, Discussion Papers from VATT Institute for Economic Research

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 RD, Economic growth, Taloudellinen kasvu, Labour market, Työmarkkinat, Labor market and policies promoting economic growth, Työmarkkinat ja kasvua tukeva politiikka, L630 - Microelectronics; Computers; Communications Equipment, O300 - Technological Change; Research and Development: General, O390 - Technological Change: Other, (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-cse, nep-eff and nep-ino
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