Firm-specific knowledge and technical efficiency of watch and clock manufacturing firms in China

This paper tests whether firm-specific knowledge in terms of capital intensity, product differentiation, and research and development contribute to an improvement in firm efficiency. Based on a representative dataset from the watch and clock industry in southern China, the technical efficiency is estimated using a non-parametric data envelopment analysis approach. Through a Tobit model, we investigate whether a firm's specific knowledge influences its efficiency. The results suggest that capital intensity and research and development have a positive effect on the efficiency of the sample firms, and identify their roles of firm-specific knowledge in explaining inter-firm variation in efficiency. However, sample firms with high level of product differentiation were found to have no obvious advantages in efficiency performance.