R&D, Foreign Technology and Technical Efficiency in Developing Countries

L. Barasa, P. Kimuyu, B. Kinyanjui, P.A.M. Vermeulen, Joris Knoben

    Research output: Working paper › Other research output

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    Abstract

    This study investigates the relationship between firms’ innovation activities and efficiency in manufacturing firms in developing countries. We examine whether innovation activities including internal research and development (R&D) and adoption of foreign technology have differential effects on technical efficiency. We hypothesize that the relation between internal R&D and technical efficiency is positive; the relation between adoption of foreign technology and technical efficiency is negative and lastly, internal R&D in combination with the adoption of foreign technology have a positive effect on technical efficiency. We use cross-sectional firm level survey data from the 2013 World Bank Enterprise Survey and the linked 2014 Innovation Follow-up Survey for examining the effect of innovation activities on firms’ technical efficiency. We test our hypothesis using cross-sectional stochastic frontier analysis. We find that internal R&D has a negative and significant effect on technical efficiency. Adoption of foreign technology on the other hand does not have a significant effect on technical efficiency. Nevertheless, the combination of internal R&D and adoption of foreign technology has a negative and significant effect on technical efficiency. We conclude that internal R&D may have dynamic effects on technical efficiency. Furthermore, efficiency may be observed in firms conducting internal R&D but results in relative inefficiency for firms not conducting R&D giving rise to overall inefficiency in the manufacturing industry. Lastly, low rates of human capital hamper R&D activity and the adoption of foreign technology in manufacturing firms in developing countries.
    Original languageEnglish
    Place of PublicationTilburg
    PublisherTilburg University
    Number of pages24
    Publication statusPublished - 2015

    Publication series

    NameDFID Working Paper

    Fingerprint

    Developing countries
    Technical efficiency
    Innovation activities
    Manufacturing firms
    Inefficiency
    Survey data
    Manufacturing industries
    Dynamic effects
    Stochastic frontier analysis
    World Bank
    Human capital
    Innovation
    Hypothesis test

    Keywords

    • Manufacturing firms
    • internal R&D
    • adoption of foreign technology
    • technical efficiency
    • stochastic frontier analysis

    Cite this

    Barasa, L., Kimuyu, P., Kinyanjui, B., Vermeulen, P. A. M., & Knoben, J. (2015). R&D, Foreign Technology and Technical Efficiency in Developing Countries. (DFID Working Paper). Tilburg: Tilburg University.
    Barasa, L. ; Kimuyu, P. ; Kinyanjui, B. ; Vermeulen, P.A.M. ; Knoben, Joris. / R&D, Foreign Technology and Technical Efficiency in Developing Countries. Tilburg : Tilburg University, 2015. (DFID Working Paper).
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    Barasa, L, Kimuyu, P, Kinyanjui, B, Vermeulen, PAM & Knoben, J 2015 'R&D, Foreign Technology and Technical Efficiency in Developing Countries' DFID Working Paper, Tilburg University, Tilburg.

    R&D, Foreign Technology and Technical Efficiency in Developing Countries. / Barasa, L.; Kimuyu, P.; Kinyanjui, B.; Vermeulen, P.A.M.; Knoben, Joris.

    Tilburg : Tilburg University, 2015. (DFID Working Paper).

    Research output: Working paper › Other research output

    TY - UNPB

    T1 - R&D, Foreign Technology and Technical Efficiency in Developing Countries

    AU - Barasa, L.

    AU - Kimuyu, P.

    AU - Kinyanjui, B.

    AU - Vermeulen, P.A.M.

    AU - Knoben, Joris

    PY - 2015

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    N2 - This study investigates the relationship between firms’ innovation activities and efficiency in manufacturing firms in developing countries. We examine whether innovation activities including internal research and development (R&D) and adoption of foreign technology have differential effects on technical efficiency. We hypothesize that the relation between internal R&D and technical efficiency is positive; the relation between adoption of foreign technology and technical efficiency is negative and lastly, internal R&D in combination with the adoption of foreign technology have a positive effect on technical efficiency. We use cross-sectional firm level survey data from the 2013 World Bank Enterprise Survey and the linked 2014 Innovation Follow-up Survey for examining the effect of innovation activities on firms’ technical efficiency. We test our hypothesis using cross-sectional stochastic frontier analysis. We find that internal R&D has a negative and significant effect on technical efficiency. Adoption of foreign technology on the other hand does not have a significant effect on technical efficiency. Nevertheless, the combination of internal R&D and adoption of foreign technology has a negative and significant effect on technical efficiency. We conclude that internal R&D may have dynamic effects on technical efficiency. Furthermore, efficiency may be observed in firms conducting internal R&D but results in relative inefficiency for firms not conducting R&D giving rise to overall inefficiency in the manufacturing industry. Lastly, low rates of human capital hamper R&D activity and the adoption of foreign technology in manufacturing firms in developing countries.

    AB - This study investigates the relationship between firms’ innovation activities and efficiency in manufacturing firms in developing countries. We examine whether innovation activities including internal research and development (R&D) and adoption of foreign technology have differential effects on technical efficiency. We hypothesize that the relation between internal R&D and technical efficiency is positive; the relation between adoption of foreign technology and technical efficiency is negative and lastly, internal R&D in combination with the adoption of foreign technology have a positive effect on technical efficiency. We use cross-sectional firm level survey data from the 2013 World Bank Enterprise Survey and the linked 2014 Innovation Follow-up Survey for examining the effect of innovation activities on firms’ technical efficiency. We test our hypothesis using cross-sectional stochastic frontier analysis. We find that internal R&D has a negative and significant effect on technical efficiency. Adoption of foreign technology on the other hand does not have a significant effect on technical efficiency. Nevertheless, the combination of internal R&D and adoption of foreign technology has a negative and significant effect on technical efficiency. We conclude that internal R&D may have dynamic effects on technical efficiency. Furthermore, efficiency may be observed in firms conducting internal R&D but results in relative inefficiency for firms not conducting R&D giving rise to overall inefficiency in the manufacturing industry. Lastly, low rates of human capital hamper R&D activity and the adoption of foreign technology in manufacturing firms in developing countries.

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    KW - internal R&D

    KW - adoption of foreign technology

    KW - technical efficiency

    KW - stochastic frontier analysis

    M3 - Working paper

    T3 - DFID Working Paper

    BT - R&D, Foreign Technology and Technical Efficiency in Developing Countries

    PB - Tilburg University

    CY - Tilburg

    ER -

    Barasa L, Kimuyu P, Kinyanjui B, Vermeulen PAM, Knoben J. R&D, Foreign Technology and Technical Efficiency in Developing Countries. Tilburg: Tilburg University. 2015. (DFID Working Paper).

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