Executive Summary study „Exploring firm-level and sectoral variation in total factor productivity (TFP)“

The objective of the study is to identify and explore factors affecting the total factor productivity (TFP) of companies in the Czech Republic with a focus on the role of firm size, firm age, indebtedness and long-term negative equity, efficiency of assets usage, liquidity, legal form, location and sector affiliation. The study utilizes a large panel dataset of 91,257 firms (548,998 observations in total) covering the period 2000–2019. The main findings were obtained through the estimation of two econometric models explaining the effects of factors on firm-level TFP.

The analysis has shown a statistically significant U-shaped relationship (with the turning point of 38, resp. 36 years) between firm age and the overall TFP. Firms with fewer employees, often officially registered as self-employed individuals/freelancers, reported higher levels of productivity. Nevertheless, when it comes to firm property (assets), the authors find a positive relationship between firm size and TFP. A high proportion of debts in the capital structure of analysed companies, or even negative equity, has been negatively associated with TFP levels.

Concerning the results, managers should be mindful of optimal capital structure principles due to the negative impact of a high level of debts on the productivity level. High indebtedness means high-interest payments drawing earnings off, which may be, especially in the long term, a hindrance to investments. The entrepreneurship and small- and medium-sized enterprise policies may be targeted at the soft policy actions, including advisory services and counselling on business development or risk and on the provision of financial capital allowing firms to strive for growth-oriented projects. More research is needed in the deeper exploration of sectoral and regional determinants of firm TFP, as both regional and sectoral heterogeneity were observed in the study.


Target Audience/Stakeholders: Corporate finance and business economics researchers, managers, entrepreneurship and SME policymakers

Citation: Dvouletý, O., & Blažková, I. (2021). Exploring firm-level and sectoral variation in total factor productivity (TFP). International Journal of Entrepreneurial Behavior & Research. DOI: https://doi.org/10.1108/IJEBR-11-2020-0744

Source: https://www.researchgate.net/publication/351696726_Exploring_Firm-level_and_Sectoral_Variation_in_Total_Factor_Productivity_TFP