Product Quality, Productive Efficiency, and International Technology Diffusion : Evidence from Plant-Level Panel Data
What mechanisms most frequently transmit foreign technologies to developing country firms? Do these foreign technologies affect both productive efficiency and product quality in the recipient firms? Under what circumstances do firms pursue activiti...
| Main Authors: | , , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2013
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2002/01/1687152/product-quality-productive-efficiency-international-technology-diffusion-evidence-plant-level-panel-data http://hdl.handle.net/10986/15721 |
| Summary: | What mechanisms most frequently transmit
foreign technologies to developing country firms? Do these
foreign technologies affect both productive efficiency and
product quality in the recipient firms? Under what
circumstances do firms pursue activities that give them
access to foreign knowledge? To address these questions, the
authors develop a new methodology and apply the framework to
plant-level panel data from Colombia, Mexico, and Morocco.
Their results point to several basic messages. First, by
imposing enough structure on the production function and the
demand system, it is possible to measure product quality and
marginal costs at the plant level and to relate the
evolution of these variables to firms' activity
histories. Doing so, the authors find strong firm-level
persistence in both quality and marginal costs. But in most
industry or country panels that they study, past
international activities help little in predicting current
performance once past realizations on quality and marginal
cost are controlled for. That is, activities do not
typically Granger-cause performance. Interestingly, in the
minority of cases where significant associations emerge,
international activities appear to move costs and product
quality in the same direction. So the net effect on profits
in these cases is not immediately apparent. Second, several
basic patterns emerge with respect to the determinants of
international activities. Most fundamentally, activities are
highly persistent, even after unobserved heterogeneity is
controlled for. That suggests that firms incur sunk
threshold costs when they initiate or cease activities, so
temporary policy or macroeconomic shocks may have long-run
effects on the patterns of activities observed in a
particular country or industry. Also, activities tend to go
together, so that studies that relate firms'
performance to one international activity and ignore the
others may generate misleading conclusions. But the bundling
of activities seems to mainly reflect unobserved plant
characteristics, such as managerial philosophy, contacts,
product niche, and location. Once these are controlled for,
there is little evidence that engaging in one international
activity increases the probability that a firm will engage
in others in the future. |
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