KTH/CESIS Working Paper Series in Economics and Institutions of Innovation
Dong-Hyun Oh, Hans Lööf
The Icelandic Economy: a victim of the financial crisis or simply inefficient?
() and Almas Heshmati
Abstract: Iceland, one of the smallest European economies, was hit
severely by the 2008-financial crisis. This paper uses a firm-level
Community Innovation Survey (CIS) data set to consider the economy in the
period preceding the collapse of its financial system. We examine the
linkage between the crisis and innovativeness from the perspective of
technical efficiency by means of the Data Envelopment Analysis of 204
randomly selected firms. The results suggest that a substantial fraction of
the Icelandic firms can be classified as non-efficient in their production
process. The production scale of many manufacturing firms is too small to
be considered technically efficient, while services firms typically use
excessive resources in their production process. A remarkably weak
performance in transforming R&D and labor efforts into successful
innovations is observed. Based on the empirical results, suitable policy
implications are suggested to remedy the inoptimal production structure and
help economic recovery.
Keywords: Technical efficiency; R&D; Innovation; Productivity; Manufacturing; Services; Iceland; (follow links to similar papers)
JEL-Codes: C67; D24; D57; L25; L60; L80; (follow links to similar papers)
28 pages, September 28, 2009
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