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Firm heterogeneity in TFP, sectoral innovation and geography. Evidence from Italy

Francesco Aiello, Valeria Pupo () and Fernanda Ricotta

MPRA Paper from University Library of Munich, Germany

Abstract: Sectoral and territorial specificities affect the firm’s capabilities of being productive. While there is a wide consensus on this, a quantitative measure of the these effects has been lacking. To this end, we combine a dataset of Italian firms with some meso regional and sectoral variables and apply a cross-classified model that allows for a clear distinction between firm, region-specific and sector-specific effects. After observing a marked TFP heterogeneity across firms, the paper addresses the issue of understanding how much differences in firms’ productivity depend on regional localisation and sector specificities. Results refer to 2004-2006 and are threefold. Firstly, they confirm that the main source of firm variety is mostly due to differences revealed at individual level. Secondly, we find that sector is more important than location in explaining firms’ TFP. Lastly, the results show that firm TFP increases when it belongs to more innovative sectors. Similarly, companies get benefits from belonging to sectors where there is a high proportion of firms using R&D public support and a high propensity to collaborate in innovative projects.

Keywords: Total Factor Productivity; Firms’ Heterogeneity; Sectoral innovation; Geography; Cross-Classified Models (search for similar items in EconPapers)
JEL-codes: L25 L60 O33 (search for similar items in EconPapers)
Date: 2013-07-23
New Economics Papers: this item is included in nep-bec, nep-cse, nep-eff, nep-geo, nep-ino, nep-knm, nep-sbm, nep-tid and nep-ure
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