Efficiency of European firms

Abstract

This paper analyzes the technological effi ciency of companies in the European Union (EU). Our extensive database covers more than 4 million fi rm/year observations from many EU countries including both manufacturing and service sectors in 2001-2007. Methodologically we apply a model of a stochastic production productivity frontier. We show that: the economic signifi cance of company age is negligible, the higher the debt the greater the effi ciency, bigger companies are less effi cient, and a medium-level concentration of the market benefi ts companies. Majority ownership, in contrast, does not lead to higher effi ciency, but a combination of majority and minority ownership has a positive disciplinary infl uence leading to higher effi ciency. As to the origins of ownership, it does not seem that foreign-(co-)owned companies imply greater effi ciency in old European countries, whereas foreign ownership is a signifi cant driver of effi ciency in new EU members through FDI. Copyright © 2000 - 2014 Vysoká škola ekonomická.