The Performance of German Firms in the Business-Related Service Sectors: A Dynamic Analysis
45 Pages Posted: 9 Nov 2003
Date Written: 2000
We analyze the performance of firms in the German business-related services sector. A quarterly business survey provides the panel data base of our study. Firm performance is measured by the survey respondents' ordinal indication of their changes in total sales. We use a firstorder Markov chain and a multinomial logit specification to model the transition probabilitites. Three variants of the model are estimated: A linear index model with and without unobserved firm heterogeneity and a semiparametric model. Main results are that firm size has a positive effect on firm performance, that young firms outperform older competitors, that a bank-relationship with a single creditor has a stabilizing effect and that the degree of diversification has a negative impact on firm performance. The legal status appears to have no significant effect.
Keywords: Markov chain, service sector, business survey, firm performance, multinomial logit model, generalized additive model
JEL Classification: L89, C23, C14
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