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

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  • Francesco Aiello
  • Valeria Pupo
  • Fernanda Ricotta

Abstract

Sectoral and territorial specificities affect a firm's capabilities of being productive. While there is a wide consensus on this, a quantitative measure of these effects has been lacking. To this end, we combine a data-set 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 have three aspects. First, they confirm that the main source of firm variety is mostly due to differences revealed at individual level. Secondly, we find that the 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.

Suggested Citation

  • Francesco Aiello & Valeria Pupo & Fernanda Ricotta, 2015. "Firm heterogeneity in TFP, sectoral innovation and location. Evidence from Italy," International Review of Applied Economics, Taylor & Francis Journals, vol. 29(5), pages 579-607, September.
    • Handle: RePEc:taf:irapec:v:29:y:2015:i:5:p:579-607
    DOI: 10.1080/02692171.2015.1016408
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    References listed on IDEAS

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    1. Maria Gabriela Ladu, 2010. "Total Factor Productivity Estimates: Some Evidence from European Regions," WIFO Working Papers 380, WIFO.
    2. Giovanni Iuzzolino & Guido Pellegrini & Gianfranco Viesti, 2011. "Convergence among Italian Regions, 1861-2011," Quaderni di storia economica (Economic History Working Papers) 22, Bank of Italy, Economic Research and International Relations Area.
    3. Andrea Brandolini & Piero Cipollone, 2001. "Multifactor Productivity and Labour Quality in Italy, 1981-2000," Temi di discussione (Economic working papers) 422, Bank of Italy, Economic Research and International Relations Area.
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    Cited by:

    1. Francesco Aiello & Fernanda Ricotta, 2014. "Firm heterogeneity in productivity across Europe. What explains what?," ERSA conference papers ersa14p808, European Regional Science Association.
    2. Francesco Aiello & Graziella Bonanno, 2018. "Multilevel empirics for small banks in local markets," Papers in Regional Science, Wiley Blackwell, vol. 97(4), pages 1017-1037, November.
    3. Abeer Elshennawy & Mohamed Bouaddi, 2018. "Sources of Heterogeneity in Labor Productivity and Total Factor Productivity in Egyptian Manufacturing," Working Papers 1276, Economic Research Forum, revised 26 Dec 2018.
    4. Massimo Tamberi, 2018. "Productivity Differentiantion Along the Development Process: a "Meso" Approach," Working Papers 427, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    5. Fernanda Ricotta, 2016. "Productivity Differences By Export Destination," Working Papers 201601, Università della Calabria, Dipartimento di Economia, Statistica e Finanza "Giovanni Anania" - DESF.
    6. Paola Cardamone, 2017. "A Spatial Analysis of the R&D-Productivity Nexus at Firm Level," Growth and Change, Wiley Blackwell, vol. 48(3), pages 313-335, September.
    7. Francesco Aiello & Fernanda Ricotta, 2016. "Firm heterogeneity in productivity across Europe: evidence from multilevel models," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 25(1), pages 57-89, January.
    8. Claudiu Tiberiu Albulescu & Camélia Turcu, 2022. "Productivity, financial performance, and corporate governance: evidence from Romanian R&D firms," Applied Economics, Taylor & Francis Journals, vol. 54(51), pages 5956-5975, November.
    9. Grace Carolina Guevara‐Rosero, 2021. "Determinants of manufacturing micro firms' productivity in Ecuador. Do industry and canton where they operate matter?," Regional Science Policy & Practice, Wiley Blackwell, vol. 13(4), pages 1215-1248, August.
    10. Mahdi Ghodsi, 2020. "Is Austria’s economy locked-in in the CESEE region? Austria’s competitiveness at the micro-level," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 47(3), pages 669-693, August.
    11. Simone Gitto, 2017. "Efficiency change, technological change and capital accumulation in Italian regions: a sectoral study," International Review of Applied Economics, Taylor & Francis Journals, vol. 31(2), pages 191-207, March.
    12. Anna Ferragina & Fernanda Mazzotta, 2015. "Agglomeration economies in Italy: impact on heterogeneous firms’ exit in a multilevel framework," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 42(4), pages 395-440, December.
    13. Fernanda Ricotta, 2019. "The Quality of Regional Government and Firm Performance," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 11(2), pages 27-40, February.

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