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This paper provides new evidence about the link between firm-level total factor productivity (TFP) and stock returns. We estimate firm-level TFP and show that it is strongly related to several firm characteristics such as size, the book-to-market ratio, investment, and hiring rate. Low productivity firms earn a significant premium over high productivity firms in the following year, and this premium is countercyclical. We show that a production-based asset pricing model calibrated to match the cross section of measured firm-level TFPs can replicate the empirical relationship between TFP, many firm characteristics, and stock returns. Our results offer an explanation as to how these firm characteristics rationally predict returns. This paper was accepted by Wei Jiang, finance.

We study the effects of firm-level microeconomic fluctuations on aggregate productivity in the United Kingdom. We show that a standard measure of residual productivity growth of the largest UK firms (the ‘granular residual’) produces results that are partly counter-intuitive and statistically insignificant. To combat this, we propose a refinement to the widely used control function approach to estimating technology shocks in a production function, which is aimed at accounting for firm-level heterogeneity and the potential existence of common shocks. Using this approach, we find that idiosyncratic firm-level shocks matter for the UK; the ‘granular residual’ can explain around 30% of aggregate UK productivity dynamics. We also show that simplifications of our approach, which do not control for firm-level heterogeneity and the existence of common shocks, do not perform well empirically, highlighting the importance of identifying firm-specific shocks correctly in order to properly test the ‘granularity hypothesis’.

The literature has documented a large degree of heterogeneity across firms in terms of productivity. In this article, I focus on market potential as a source of differences in productivity across Spanish manufacturing firms. Market potential is conditioned by the existing transport infrastructure. Transport infrastructure investment improves accessibility to input and output markets and thus increases market potential. Market potential is measured by travel time through the real transport network and takes into account the immense improvements that have taken place in Spain over the last decades. The results show a significant positive effect of market potential on firm-level productivity, which is robust to various estimation methods. This indicates an important mechanism of how road infrastructure improvements can generate wider economic impacts.

This article provides fresh insights into the link between brand equity and firm-level productivity, including the direct effect and the potential interaction effect with research and development (R&D) and human capital. A panel data model using Chinese listed companies' accounting data from 2012 to 2017 is constructed to test our hypotheses. The main findings are as follows: First, both the direct effects and the potential interaction effects with R&D and human capital are significant. Second, a larger direct effect exists in large enterprises, state-owned enterprises, and manufacturing sector enterprises when considering firm heterogeneity. Third, when it comes to the interaction effect, firms are able to use R&D and human capital to enhance the impact of brand equity on firm productivity, while this effect is insignificant in non-state-owned and service sector enterprises. Overall, our results suggest brand equity will play an important role in future growth in China, and proper attention should be devoted to it in terms of policy and regulation.

This study explores the relationship between firm-level carbon productivity (CRP), home country environmental performance (HCEP), and firm performance—both financial and international—in the global meat exporting industry. While prior research has examined these dynamics in manufacturing sectors, limited attention has been paid to the meat industry, which is both economically significant and environmentally intensive. Using a multiple case study approach, we analyze data from three leading meat-exporting firms—Agrosuper (Chile), BRF (Brazil), and Danish Crown (Denmark)—over the period 2020–2023. CRP is operationalized as the ratio of firm output to CO2 emissions, while HCEP is measured by national emissions per million USD of GDP. Financial performance is assessed via return on assets (ROA), and international performance through export intensity. Our findings reveal a nuanced relationship between CRP and firm performance. Contrary to theoretical expectations, a higher CRP does not consistently translate into improved financial performance, suggesting potential trade-offs between sustainability investments and profitability. However, a positive association is observed between CRP and international performance, particularly in firms operating within environmentally advanced countries. These results highlight the importance of home country environmental contexts in shaping firms’ global competitiveness. This research contributes to the literature by introducing CRP as a firm-level metric in the meat industry and by emphasizing the moderating role of HCEP. The findings offer practical implications for policymakers and managers seeking to align environmental responsibility with economic and international performance goals.

This paper models the bounded learning concept with the learning progress function characterized by the degree of efficiency and the specification of the learning progress as a logistic function capturing both the slow startup and the limit in learning progress. We differentiate learning efficiency from the technical efficiency. The endogeneity corrected stochastic frontier model is then used to decompose the factor productivity growth into components associated with technological change, technical efficiency, scale, and learning. This productivity growth decomposition provides useful information and policy level insight in firm-level productivity analysis. Empirical results based on plant-level panel data on the Colombian food manufacturing industry for the period 1982–1998 suggest that productivity growth not only stems from technical progress, technical efficiency change, and scale but also from significant learning effect. The relative importance of the productivity growth components provides perspective for efficient resource allocation within the firm.

This paper assesses sources of productivity spillovers in China's electric and electronic manufacturing industry using a rich panel data-set of 25,360 firms observed over the period 2004-2007. This industry is characterized by its important reliance on technology. In particular, the paper focuses on the role of other firms' productivity as well as productivity shifters in affecting own firm-level total factor productivity. In addition, this paper examines the possible difference between spillovers from foreign-owned units and from units which participate at global markets through exporting in comparison to domestically-owned and non-exporting units. We find evidence of stronger spillovers from exporting firms than from non-exporting firms. This is true for foreign-owned as well as domestic exporters. The strength of the spillover effects differ across subsectors.

The paper takes a first step in the direction of simultaneously incorporating sectoral and firm-level heterogeneity in the models of international trade and macroeconomics in a tractable manner: without increasing the complexity of numerical computations compared to the existing models with heterogeneity in one dimension. In a model with sectoral heterogeneity in trade costs and firm-level heterogeneity in productivity, introducing one source of heterogeneity at a time and piecing together the results implies that, on reduction in trade costs, more goods and more varieties of every tradable good become traded. In contrast, in the correctly specified model with simultaneous heterogeneity in both dimensions, while more goods do indeed become tradable, but for more than 50% of the previously traded goods, the number of traded varieties falls. The model also reconciles apparently contrasting predictions for the differences in the deviation of domestic price from the world price for the traded and nontraded goods when heterogeneity is introduced, one dimension at a time.

Purpose – There is plenty of individual-level evidence, based on the estimation of Mincerian equations, showing that better-educated individuals earn more. This is usually interpreted as a proof that education raises labour productivity. Some macroeconomists, analysing cross-country time series, also support the idea that the continuous expansion of education has contributed positively to growth. Surprisingly, most economists with an interest in human capital have neglected the level of the firm to study the education-productivity-wage nexus. And the few published works considering firm-level evidence are lacking a proper strategy to cope with the endogeneity problem inherent to the estimation production and wage functions. The purpose of this paper is to aim at providing estimates of the causal effect of education on productivity and wage labour costs. Design/methodology/approach – This paper taps into a rich, firm-level, Belgian panel database that contains information on productivity, labour cost and the workforce’s educational attainment to deliver estimates of the causal effect of education on productivity and wage/labour costs. Therefore, it exclusively resorts to within firm changes to deal with time-invariant heterogeneity bias. What is more, it addresses the risk of simultaneity bias (endogeneity of firms’ education-mix choices in the short run) using the structural approach suggested by Ackerberg et al. (2006), alongside more traditional system-GMM methods (Blundell and Bond, 1998) where lagged values of labour inputs are used as instruments. Findings – Results suggest that human capital, in particular larger shares of university-educated workers inside firms, translate into significantly higher firm-level labour productivity, and that labour costs are relatively well aligned on education-driven labour productivity differences. In other words, the authors find evidence that the Mincerian relationship between education and individual wages is driven by a strong positive link between education and firm-level productivity. Originality/value – Surprisingly, most economists with an interest in human capital have neglected the level of the firm to study the education-productivity-pay nexus. Other characteristics of the workforce, like gender or age have been much more investigated at the level of the firm by industrial or labour economists (Hellerstein et al., 1999; Aubert and Crépon, 2003; Hellerstein and Neumark, 2007; Vandenberghe, 2011a, b, 2012; Rigo et al., 2012; Dostie, 2011; van Ours and Stoeldraijer, 2011). At present, the small literature based on firm-level evidence provides some suggestive evidence of the link between education, productivity and pay at the level of firms. Examples are Hægeland and Klette (1999); Haltiwanger et al. (1999). Other notable papers examining a similar question are Galindo-Rueda and Haskel (2005), Prskawetz et al. (2007) and Turcotte and Whewell Rennison (2004). But, despite offering plausible and intuitive results, many of the above studies essentially rely on cross-sectional evidence and most of them do not tackle the two crucial aspects of the endogeneity problem affecting the estimation of production and wage functions (Griliches and Mairesse, 1995): first, heterogeneity bias (unobserved time-invariant determinants of firms’ productivity that may be correlated to the workforce structure) and second, simultaneity bias (endogeneity in input choice, in the short-run, that includes the workforce mix of the firm). While the authors know that labour productivity is highly heterogeneous across firms (Syverson, 2011), only Haltiwanger et al. (1999) control for firm level-unobservables using firm-fixed effects. The problem of simultaneity has also generally been overlooked. Certain short-term productivity shocks affecting the choice of labour inputs, can be anticipated by the firms and influence their employment decision and thus the workforce mix. Yet these shocks and the resulting decisions by firms’ manager are unobservable by the econometrician. Hægeland and Klette (1999) try to solve this problem by proxying productivity shocks with intermediate goods, but their methodology inspired by Levinsohn and Petrin (2003) suffers from serious identification issues due to collinearity between labour and intermediate goods (Ackerberg et al., 2006).