@techreport{db6d5722a50c4b6980c7a9b7e8347699,
title = "R&D, Foreign Technology and Technical Efficiency in Developing Countries",
abstract = "This study investigates the relationship between firms{\textquoteright} 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{\textquoteright} 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.",
keywords = "Manufacturing firms, internal R&D, adoption of foreign technology, technical efficiency, stochastic frontier analysis",
author = "L. Barasa and P. Kimuyu and B. Kinyanjui and P.A.M. Vermeulen and Joris Knoben",
year = "2015",
language = "English",
series = "DFID Working Paper",
publisher = "Tilburg University",
type = "WorkingPaper",
institution = "Tilburg University",
}