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The Dynamic Performance of Australian Enterprises

Author

Listed:
  • Derek Bosworth

    (Manchester School of Management, UMIST)

  • Joanne Loundes

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

Abstract

This paper investigates the interaction of discretionary investments (R&D, capital investment, training and advertising), innovation, productivity and profitability within a dynamic framework of firm performance. A dynamic and closed model of firm performance is set up, and the resulting empirical model is tested as a series of recursive equations, using a four-year balanced panel data set of Australian firms drawn from the Business Longitudinal Survey. The results indicate that current economic profit has an important role to play in enabling firms to invest, and the findings indicate which of these investments are complements and which are substitutes. The paper explores the impact of these discretionary investments on innovation and total factor productivity performance. Finally, the impact of past discretionary investments both directly and indirectly (that is, via innovation and productivity performance) on current profitability is examined. Past values of these investments have a significant influence on current profit, effectively closing the model. The various results enable the paper to draw a number of other policy conclusions, in particular, some concerns about the potentially negative impact of own-market share on dynamic performance.

Suggested Citation

  • Derek Bosworth & Joanne Loundes, 2002. "The Dynamic Performance of Australian Enterprises," Melbourne Institute Working Paper Series wp2002n03, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    • Handle: RePEc:iae:iaewps:wp2002n03
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    File URL: http://melbourneinstitute.unimelb.edu.au/downloads/working_paper_series/wp2002n03.pdf
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    References listed on IDEAS

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    Cited by:

    1. Robert Breunig & Marn-Heong Wong, "undated". "Australia's firm-level productivity -- a new perspective," Australasian Stata Users' Group Meetings 2004 2, Stata Users Group.
    2. W. H. Furtan & J. Sauer, 2008. "Determinants of Food Industry Performance: Survey Data and Regressions for Denmark," Journal of Agricultural Economics, Wiley Blackwell, vol. 59(3), pages 555-573, September.
    3. Francesco Barbera & Ken Moores, 2013. "Firm ownership and productivity: a study of family and non-family SMEs," Small Business Economics, Springer, vol. 40(4), pages 953-976, May.
    4. Elizabeth Webster, 2002. "Intangible and Intellectual Capital: A Review of the Literature," Melbourne Institute Working Paper Series wp2002n10, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    5. Anne Wyatt & Hermann Frick, 2010. "Accounting for Investments in Human Capital: A Review," Australian Accounting Review, CPA Australia, vol. 20(3), pages 199-220, September.
    6. Furtan, William Hartley & Sauer, Johannes, 2008. "Determinants of Food Industry Performance – Empirical Evidence Based on a Survey," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6422, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    7. A. Vijayakumar, 2009. "Determinants of Financial Structure of Corporate Sector in India- Some Empirical Evidence," Management and Labour Studies, XLRI Jamshedpur, School of Business Management & Human Resources, vol. 34(4), pages 471-487, November.

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