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Firm Competitiveness Determinants: Results of a Panel Data Analysis (preliminary results)

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Firm Competitiveness Determinants: Results of a Panel Data Analysis (preliminary results) Tibor Lalinsky National Bank of Slovakia 8 June 2012 – PowerPoint PPT presentation

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Title: Firm Competitiveness Determinants: Results of a Panel Data Analysis (preliminary results)


1
Firm Competitiveness Determinants Results of a
Panel Data Analysis (preliminary results)
  • Tibor Lalinsky
  • National Bank of Slovakia

2
Motivation/Starting Points
  • Several studies indicate that leading Slovak
    companies are competitive (highly profitable),
    but we do not know much about why it is so
  • Very limited number of quantitative studies on
    competitiveness factors of Slovak companies
    (almost solely as a part of cross-country
    studies)
  • Available literature concentrates mainly on the
    influence of macro factors (cross-country
    differences) and not on (qualitative) company
    factors
  • Availability of questionnaire survey results
    (with some potential so far limited use) and
    individual annual data
  • No consensus on a common competitiveness measure
    (almost every study uses different dependent
    variable)
  • Relatively large number of possible dependent and
    explanatory variables
  • gt We know it should be a dynamic process based
    on productivity, profitability, export
    performance and market share

2
3
Model Specification
  • Linear dynamic panel model with individual
    effects

yit ?yi,t-1 xitß1 ziß2 ai eit
Basic and survey based qualitative (dummy)
variables (sector, management, foreign influence
other company and environment data)
Available performance/ competitiveness
variables (profitability, productivity export and
market share data)
Basic quantitative variables (profit/loss,
balance sheet, production and export data)
Dependent, lagged dependent and quantitative
explanatory variables expressed in logs
3
4
Data
  • Financial data on the 90 top Slovak companies
    (that participated in our survey) from Trend Top
    200 Database for years 2001 - 2009
  • basic qualitative company data from the same
    database
  • Additional qualitative data from the Slovak
    Business Register
  • Results (mainly qualitative data) from our
    questionnaire survey
  • Some data (total export, value added and
    turnover) about non-financial companies from the
    Statistical Office of the SR

4
5
Dependent Variables
  • labour productivity company gross revenue /
    number of employees
  • return on assets company gross profit / total
    company assets
  • export performance value of company export
  • market share company revenue / total revenue of
    non-financial companies in SK
  • other variables return on equity, profit margin
    , productivity based on value added, capital
    productivity, export share, total revenue,
    amortisation adjusted value added all 3
    profitability indicators based on after tax
    profit
  • -gt not significant lagged dependent variable

5
6
Explanatory Variables - Quantitative
  • Value added
  • Revenue
  • Value of export
  • Investments
  • Long-term assets
  • Fixed assets
  • Amortisation
  • Number of employees
  • Personal costs
  • Loans
  • Company age
  • Export from SK
  • GDP in SK
  • derived variables
  • Market share
  • Labour costs
  • Leverage
  • Investment productivity
  • Capital intensity
  • Investment intensity
  • Export performance
  • Export share
  • all dependent variables

Source Trend
SO SR
7
Explanatory Variables - Qualitative
  • Top15 Competitiveness factors
  • Efficiency of company leadership
  • Concentration on cost reduction
  • Professionalism of management
  • Quality of company management
  • Extent of utilization of comm. technology
  • Existence of developed supply industries
  • Buyer sophistication
  • Nature of competitive advantage
  • Availability of experienced managers
  • Availability of adeq. educated labor force
  • Exchange rate stability
  • Energy costs
  • EU membership
  • Perspective of euro adoption
  • Quality of transport infrastructure

Basic company factors
  • Industry dummy
  • Network industry
  • Accounting year
  • Foreign capital
  • Name change
  • Foreign manager
  • Manager with domestic
  • education

Source Trend
Business Register
Source Lalinský (2008)
8
Questionnaire Survey Basic Facts
  • Target group top 200 Slovak companies (93
    responds)
  • Content List of 73 potential factors influencing
    company competitiveness
  • 31 company factors
  • 17 sectoral factors
  • 25 macro-level factors
  • For every factor respondents
  • were asked to evaluate
  • Current state
  • Effect on present competitiveness
  • Effect on future competitiveness
  • Source Lalinsky (2008)
  • WP 3/2008 Competitiveness Factors of Slovak
    Companies

9
Methodology
  • OLS, FE and RE are biased because lagged
    dependent variable is correlated with error term
    gt we need IV/GMM estimator
  • Identification of key models with lagged
    dependent variable and quantitative explanatory
    variables (1 for profitability, 1
    for productivity, 1 for export performance and 1
    for market share)
  • Extended regressions including all 15
    competitiveness factors (top 5 company, sectoral
    and macro factors) very limited results
  • Gradual extension of the 4 key models including
    both basic company and competitiveness factors

10
Main Results A) Profitability
  • Return on assets as a function of lagged
    dependent variable and company market share
  • Significant effect of several competitiveness
    factors
  • Dominance of macro factors (energy costs, EU
    membership ER stability)
  • Only one top 5 sectoral (developed consumer
    sectors) in combination with an additional factor
  • Company communication tech. utilisation with
    price/cost reduction at the company level

11
Main Results B) Labour productivity
  • Labour productivity as a function of lagged
    value of productivity and labour costs
  • Statistically significant, but relatively small
    effect of foreign management at least one
    company, sectoral and macro factor
  • EU membership at the macro level
  • Competitive advantage based on efficiency at the
    sectoral level
  • Medium and high quality company management at the
    company level

12
Main Results C) Export performance
  • export as a function of lagged value of export
    and labour costs
  • Statistically significant, but relatively small
    effect of foreign management at least one
    company, sectoral and macro factor
  • Euro adoption at the macro level
  • Developed consumer sectors at the sectoral level
  • Highly efficient leadership at the company level
    (only with additional macro factor)

13
Main Results D) Market share
  • Market share as a function of lagged value of
    market share and export share
  • Statistically significant, but relatively small
    effect of one sectoral and one macro factor (but
    relatively low p-value for Hansen test)
  • Energy costs at the macro level
  • Customer demandingness at the sectoral level
  • None of the top 5 company level factors, only
    additional corporate relationships with other
    companies was statistically significant

14
Conclusion
  • The regression analysis showed statistically
    significant impact of presence of foreign manager
    in the company on its competitiveness (but only
    based on productivity and exports)
  • Econometric analysis has confirmed statistically
    significant impact of most of the competitiveness
    factors (identified by the survey) on the
    analysed companies competitiveness
  • Their impact differs across considered
    competitiveness indicators, they seem to explain
    much larger part of profitability than
    productivity, export or market share
  • There were only three variables statistically
    significant for at least 2 indicators (energy
    costs, EU membership and developed consumer
    sectors)
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