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Downsizing in the German Chemical Manufacturing Industry during the 1990s

Referierte Aufsätze Web of Science

Oleg Badunenko

In: Small Business Economics 34 (2010), 4, S. 413-431


The German chemical manufacturing industry experienced major downsizing between 1992 and 2004, with the average size of firms shrinking by nearly half during this period. This study uses modern frontier efficiency analysis to investigate the determinants of this downsizing. Based on reliable census data, the results of this analysis suggest that firms were not primarily concerned with improving technical efficiency, but with establishing an optimal scale of production. The proportion of scale-efficient firms has been persistently increasing, and downsizing is found to be a rational conduct because all scale-inefficient firms have continually operated under the decreasing returns portion of technology.

Topics: Firms, Industry

JEL-Classification: D21;L23;L25;L26;L65
Keywords: Chemical manufacturing, DEA, Firm-level data, Firm size, Technical and scale efficiency, Technological change