How does the national human capital index influence the total factor productivity of the Romanian R&D firms?

Abstract

BACKGROUND: Productivity is essential for economic development. However, the computation of the total factor productivity (TFP) for research and development (R&D) firms is largely ignored by the previous literature, in particular in the Eastern European countries. OBJECTIVE: The purpose of this paper is to analyze to what extent the national human capital index (NHCI) influences TFP for a set of 116 Romanian firms, acting in the R&D industry. METHODS: We compute the TFP level using different approaches, by analyzing firm-level data from the period of 2007 to 2016. At the same time, we resort to a common factor analysis (CFA) to derive the NHCI for Romania. Afterwards we apply a panel data investigation to see the impact of NHCI on TFP and we use several control variables as firm-level financial performances and firm’s size. RESULTS: Our estimation reveals that NHCI, a component of the national intellectual capital index, has a significant but marginal impact on TFP, whereas the financial performances play a more important role in enhancing firms’ productivity. CONCLUSIONS: The national human capital influences the firm productivity in the long run. At the same time, larger companies are financially more stable compared with their smaller counterparts and record a higher TFP.