Scandinavian Working Papers in Economics

Working Paper Series in Economics and Institutions of Innovation,
Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

No 162: Creating Innovations, Productivity and Growth - the efficiency of Icelandic firms

Dong-huyn Ho () and Hans Lööf ()
Additional contact information
Dong-huyn Ho: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, Postal: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, SE-100 44 Stockholm, Sweden
Hans Lööf: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, Postal: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, SE-100 44 Stockholm, Sweden

Abstract: Iceland is one of the smallest European economies and the country was hit severely by the 2008-financial crisis. This paper considers the economy in the period preceding the collapse. Applying a Data Envelopment Analysis on 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 technically efficient, while service firms typically use excessive resources in their production process. A remarkably weak performance in transforming R&D and labour efforts into successful innovations is observed.

Keywords: Technical efficiency; R&D; Innovation; Productivity

JEL-codes: C14; D24; O14; O33

43 pages, January 15, 2009

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