Title: Factor complements and substitution for the translog knowledge production function considering ownership structure and firm financial condition
Author: Wen-Cheng Lu
Address: Department of Economics, Ming Chuan University, 5 De Ming Rd., Gui Shan District, Taoyuan County 333, Taiwan
Abstract: This paper uses stochastic frontier analysis to evaluate R&D efficiency and investigate factor substitutability for the translog knowledge production function. We find that most substitution elasticities are positive and support substitute relationships between the four R&D inputs. Ownership structure plays an important role in R&D activity and efficiency. Our findings suggest that higher foreign and manager shareholding will promote R&D efficiency. The little protection hypothesis and unproductive R&D hypothesis are supported by means of negative relationships for return on equity (ROE)-R&D efficiency and cash flow (CF)-R&D efficiency. R&D experience and past R&D quality appears to improve R&D efficiency. Finally, small firms have higher R&D efficiency.
Keywords: SFA; stochastic frontier analysis; translog knowledge production function; R&D efficiency; firm size; ownership structure; firm financial condition; research and development; factor substitutability; small firms; return on equity; ROE; cash flow.
Int. J. of Technology Intelligence and Planning, 2013 Vol.9, No.4, pp.308 - 322
Available online: 28 Apr 2014