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What Determines the Technical Efficiency of a Firm? The Importance of Industry, Location, and Size

Oleg Badunenko (), Michael Fritsch () and Andreas Stephan ()

No 33/2006, Jenaer Schriften zur Wirtschaftswissenschaft (Expired!) from Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultät

Abstract: This paper investigates the factors that explain the level of technical efficiency of a firm. In our empirical analysis, we use a unique sample of about 35,000 firms in 256 industries from the German Cost Structure Census over the years 1992-2004. We estimate the technical efficiency of the firms and relate it to firm- and industry-specific characteristics. One third of the explanatory power is due to industry effects. Size accounts for another 25 percent and the headquarters? location explains ten percent of the variation in efficiency. Most other firm characteristics such as ownership structure, legal form, age of the firm and outsourcing activities have an extremely small explanatory power. R&D activity does not exert any positive influence on technical efficiency.

Keywords: Frontier analysis; determinants of technical efficiency; firm performance; industry effects; regional effects. (search for similar items in EconPapers)
JEL-codes: D24 L10 L25 (search for similar items in EconPapers)
Date: 2006-11-06
New Economics Papers: this item is included in nep-bec, nep-eff, nep-ino and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:jen:jenasw:2006-33

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