How and why do Firms differ?

Tor Klette and Arvid Raknerud ()
Additional contact information
Arvid Raknerud: Statistics Norway, https://www.ssb.no/en/forskning/ansatte

Discussion Papers from Statistics Norway, Research Department

Abstract: How do firms differ, and why do they differ even within narrowly defined industries? Using evidence from six high-tech, manufacturing industries covering a 24-year period, we show that differences in sales, materials, labor costs and capital across firms can largely be summarized by a single, firm-specific, dynamic factor, which we label efficiency in the light of our structural model. The model contains the complete system of supply and factor demand equations. It suggests that efficiency is strongly linked to profitability and firm size, but it is unrelated to labor productivity. Our second task is to understand the origin and evolution of the differences in efficiency. Among the firms established within the 24-year period that we consider, permanent differences in efficiency dominate over differences generated by firm-specific, cumulated innovations.

Keywords: efficiency; firm heterogeneity; labor productivity; intrinsic differences; firm-specific innovations; state space models; maximum likelihood. (search for similar items in EconPapers)
JEL-codes: C33 C51 D21 (search for similar items in EconPapers)
Date: 2002-07
New Economics Papers: this item is included in nep-ent and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://www.ssb.no/a/publikasjoner/pdf/DP/dp320.pdf (application/pdf)

Related works:
Working Paper: How and why do firms differ? (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ssb:dispap:320

Access Statistics for this paper

More papers in Discussion Papers from Statistics Norway, Research Department P.O.Box 8131 Dep, N-0033 Oslo, Norway. Contact information at EDIRC.
Bibliographic data for series maintained by L Maasø ().