Almas Heshmati

Knowledge capital and performance heterogeneity:: A firm-level innovation study

This paper is an empirical analysis of knowledge capital and performance heterogeneity at the firm level. We apply new econometric methods to extensive data on innovation and innovative activities in Swedish manufacturing. Knowledge capital, defined as the ratio of innovation sales to total sales, is found to be a significant factor contributing to the performance heterogeneity among firms. A number of interesting results emerge. First, the results show that there is a two-way and positive relationship between firm performance and knowledge capital. This relationship holds even when we control for human capital, type of output, firm size, capital intensity, entry, merger, partial closure or exit of firms. Second, the elasticity of productivity growth with respect to knowledge capital is doubled when all innovations are substituted for radical innovations. Third, knowledge capital rises with innovation input per employee. Fourth, profitability is important for the willingness of firms to invest in innovative activities. Fifth, when controlling for differences in innovation investments and human capital, knowledge intense firms are not more innovative than labor and capital intense firms. Finally, organizational rigidities in innovation projects are found to have a significant negative impact on innovation output.

On the relationship between innovation and performance: A sensitivity analysis

We examine sensitivity of the estimated relationship between innovation and firm performance. In doing so, we rely on a knowledge production function approach and carry out comparisons in a number of ways. The sensitivity analysis is based on the comparison of a basic econometric model estimated assuming different error structure and using the same data source, an identical model but different data sources, different classifications of firms performance, different classifications of innovation and the two main different subpopulations of the business sector. The analyses are performed in both level and growth-rate dimensions. New findings are reported and previous results are confirmed as well. The study gives indications of what factors cause variations in the estimated effects of interest and the direction of changes.

On the Growth of Micro and Small Firms : Evidence from Sweden

The relationship between the size, age and growth rate of firms is examined for a large sample of micro and small firms in Sweden. These firms have between 1–100 employees and operate in a geographically concentrated area. Micro and small firms are dominant in the industrial structure and thus their growth patterns are crucial to the economic growth of the region. The period of study is of particular interest because it allows us to evaluate the effects of various regional development policy programs on the growth and formation of firms. The data is an unbalanced panel covering the period 1993–1998. We allow for the exit and entry of firms. The growth rate is defined in terms of the number of employees, sales and assets. In the estimation of the growth rate we control for various factors characterizing the sample firms, their capital structure, performance, human capital, and local labor market conditions. Our results show that the relationship between the growth, size and age of firms is very sensitive with respect to the method of estimation, functional form and definition of growth and size.

DEA, DFA and SFA: A comparison

The nonparametric data envelopment analysis (DEA) model has become increasingly popular in the analysis of productive efficiency, and the number of empirical applications is now very large. Recent theoretical and mathematical research has also contributed to a deeper understanding of the seemingly simple but inherently complex DEA model. Less effort has, however, been directed toward comparisons between DEA and other competing efficiency analysis models. This paper undertakes a comparison of the DEA, the deterministic parametric (DFA), and the stochastic frontier (SFA) models. Efficiency comparisons across models in the above categories are done based on 15 Colombian cement plants observed during 1968–1988.

Productivity Growth, Efficiency and Outsourcing in Manufacturing and Service Industries

This paper is a survey of recent contributions to, and developments of, the relationship between outsourcing, efficiency and productivity growth in manufacturing and services. The objective is to provide a thorough and up-to-date survey that provides a significant discussion on data, as well as on the core methods of measuring efficiency and productivity. First, the readers are introduced to the measurement of partial and total factor productivity growth. Different parametric and non-parametric approaches to the productivity measurement in the context of static, dynamic and firm-specific modelling are discussed. Second, we survey the econometric approach to efficiency analysis. The issues of modelling, distributional assumptions and estimation methods are discussed assuming that cross-sectional or panel data are available. Third, the relationship between outsourcing and productivity growth in manufacturing and services is discussed. The correspondence between a number of hypotheses and empirical findings are examined. Examples of varieties of relevant empirical applications, their findings and implications are presented. Fourth, measurement of inputs and outputs in manufacturing and services are discussed. Finally, to promote useful research, a number of factors important to the analysis of outsourcing, efficiency and productivity growth in the service sector are summarised.

Efficiency Measurement in Swedish Dairy Farms: An Application of Rotating Panel Data, 1976–88

In this paper we introduce a new specification of technical inefficiency in panel data models. First, the overall technical inefficiency is decomposed into a persistent component and a residual component. Second, a multistep procedure is used to estimate the parameters of the production function as well as persistent and residual technical inefficiency. The advantage of this multistep procedure is that the parameter estimates are robust to distributional assumptions on the error components. Distributional assumptions are required in the final stage to estimate the residual component of technical inefficiency. The model is used to examine technical efficiency in Swedish dairy farms during the period 1976 to 1988.

Farm heterogeneity and technical efficiency: Some results from Swedish dairy farms

This paper introduces farm-heterogeneity in measuring technical efficiency of Swedish dairy farms using farm-level data. In calculating technical efficiency which is allowed to vary over time and across farms, we control for farm-specific effects. This is possible only when panel data is available. Furthermore, we separate technical efficiency from technical change—the presence of which is indicated by a shift in the production function over time,ceteris paribus. We also calculate percentage change in technical efficiency to examine whether farm efficiencies have improved over time. Finally, a comparison of technical efficiency, elasticities of different inputs, and technical change is made across different years and panels. The data includes four panels of dairy farms observed during the period 1976–1988, excluding 1985.

Measurement of a Multidimensional Index of Globalization

In this article we present two composite indices of globalization. The first is based on the Kearney/Foreign Policy magazine and the second is obtained from principal component analysis. They indicate which countries have become most global and show how globalization has developed over time. The indices are composed of four components: economic integration, personal contact, technology and political engagement, each generated from a number of variables. A breakdown of the index into major components provides possibilities to identify sources of globalization and associate it with economic policy measures. The empirical results show that a low rank in the globalization process is due to political and personal factors with limited possibility for the developing countries to affect. The high ranked developed countries share similar patterns in distribution of various components.

The Causal Relationship Between Information and Communication Technology and Foreign Direct Investment

This paper investigates the simultaneous causal relationship between investments in information and communication technology (ICT) and foreign direct investment (FDI), with reference to its implications on economic growth. For the empirical analysis we use data from 23 major countries with heterogeneous economics development for the period 1976–99. The results of unit roots and Johansen co-integration tests indicate variations in degrees of integration among the sample countries. Our causality test results suggest that there is a causal relationship from ICT to FDI interpreted as the higher level of ICT investment leads to increased inflow of FDI. ICT contributes to economic growth indirectly by attracting more foreign direct investment. In developed countries there already exist a build up ICT capacity which causes inflow of FDI, while in developing countries ICT capacity must be build up to attract FDI. The inflow of FDI causes further increases in ICT investment and capacity.

Effect of credit guarantee policy on survival and performance of SMEs in Republic of Korea

Effect of credit guarantee policy on survival and performance of SMEs in Republic of Korea (Small Business Economics DOI 10.1007/s11187-007-9049-y) [Erratum]