Productivity Growth Persistence: Firm Strategies, Size and System Properties

This paper investigates the dynamics of productivity in a large sample of Italian manufacturing firms, focusing on the determinants of firm-level persistence in time of high Total Factor Productivity (TFP) growth rates relative to the corresponding sectoral distributions. In particular, we assess the impact of both the internal characteristics of companies, including size and management strategies, and external systemic conditions, including business cycles and regional innovation performance. In order to disentangle the effects of the mix of internal and systemic factors in shaping firm-level persistence, we implement both Transition Probability Matrices and dynamic probit models. Results reveal the presence of significant persistence in TFP growth rates. Such persistence turns out to be path dependent since it is shaped by a number of complementary and contingent factors that locally affect the dynamics of the process.