An International Comparison of the TFP Levels and the Productivity Convergence of Japanese, Korean, Taiwanese and Chinese Listed Firms

Kyoji Fukao
Tomohiko Inui
Keiko Ito
Young Gak Kim
Tangjun Yuan

October 2009


In this paper, we analyzed productivity catching up at the firm level in the Japanese, Korean, Taiwanese and Chinese manufacturing sector using the distance from the global technological frontier as a direct measure of the potential for technological frontier. We also examined the role of the absorption capacity for the technological catch-up by including the variables, such as R&D expenditure and foreign ownership in our empirical estimation model. Our main results can be summarized as follows. First, although Japanese firms enjoy the highest average TFP level in many industries, their TFP growth rate has been relatively low during the past two decades. Taiwanese and Korean firms have achieved considerably high TFP growth in certain industries, and the some firms in the industries almost caught up or exceeded the Japanese firms' TFP level. The average TFP level of Chinese firms is still much lower than that of Japanese, Korean and Taiwanese firms in many industries. Second, in Korea, the TFP levels of low-performing firms are approaching those of the national frontier firms at a more rapid pace than in other countries. In addition, Korean firms try to catch up the global frontier once they reached to the national frontier level TFP. Chinese firms are very slow in catching up and the only engine of the knowledge creation is firms located in the trade-oriented coast. Third, in the all four countries, the speed of the convergence of the firms far from the national frontier is faster than the firms near the frontier.

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