The Potential Determinants of German Firms ’ Technical Efficiency: An Application Using Industry Level Data by

Stochastic Frontier Analysis is employed to calculate technical efficiencies of German firms at the industry level. The data come from the German Cost Structure Census of manufacturing for the period 1995-2001. This survey is conducted by the German Federal Statistical Office (Statis-tisches Bundesamt). Aggregating 1995 to 2001 firm-level data yields an unbalanced panel with 241 cross-sections (industries). While the unbalanced nature of the data precludes some time-varying specifications, one can estimate the parameters of a time-invariant fixed-effects model. With only one industry being fully efficient, the rest perform poorly, having a technical efficiency mode of 0.32. To account for this outlier, one industry is dropped from the sample. In the reduced sample, the estimated mode of technical efficiency is 0.64. The scores of technical efficiencies are negatively correlated to concentration indices, positively related to new firm formation and human capital proxy. The analysis shows that technical efficiency is not related to sales growth, R&D expenditures, capital intensity, proportion of East German firms in the industry and size of the firm. The straightforward continuation of this analysis is making use of available firm-level data