Enterprise Scale And Total Factor Productivity

With the advancement of industrialization and the transformation of economic development,improving the total factor productivity of enterprises has become the key for sustained economic growth..According to the existing theory,enterprise scale is one of the contributing factor affecting enterprise's total factor productivity.This dissertation are based on the review of literatures concerning enterprise scale and total factor productivity.The data is collected from China industrial enterprises database with a time span covering 2005-2007.The empirical work is done by estimating the mechanism in which the enterprise scale affects enterprise's total factor productivity using OLS method and IV-2SLS method.Our research is further refined by group regression with respect to different regions,technology levels and ownerships.At last,we calculate to what extent enterprise scale contributes to enterprise's total factor productivity using Shapley value decomposition method.The findings are as follows.Firstly,there exists an inverted U-type non-linear relationship between the enterprise scale and total factor productivity.The promotion effect of enterprise scale to total factor productivity is evident for most enterprises in the sample,which concludes that the expansion of enterprise scale raises enterprise's total factor productivity.Secondly,among all the effects that enterprise scale contributes to total factor productivity,scale economy contributes the most.At the meantime,enterprise scale also affects total factor productivity via technology innovation in an indirectly way.Although technological innovation has significantly promoted the improvement of enterprise's total factor productivity,the effect is restrained by the expansion of enterprise scale.Thirdly,our results remain consistent in the group regression regardless of different regions,technology levels and ownerships.Finally,the results of Shapley value decomposition shows that the contribution of enterprise scale to the disparities of firm total factor productivity is above 90% both in overall sample and grouped sample,which denotes that enterprise scale is the main factor affecting the disparities of enterprise's total factor productivity.According to the findings above,it is well recommended that government should support the small and middle enterprises with target.At the meantime,government should promote mergers and acquisitions,market competition,adjustment of industrial structure and eliminating of backward production capacity.The government should juggle improving scale economy effects and the development of technology innovation.