COMPETITION AND THE PRODUCTIVITY OF DANISH FIRMS

If is a commonplace to assume that competition within? art industry re duces firms' profit margins and production inefficiency and increases the effort and resources firms spend art innovations. Although theoret ically there are good reasons to believe that competition will increas e the productivity of the firms, there is very little empirical eviden ce on this issue. In this paper we study the productivity in Danish fi rms and the factors affecting their productivity. The study is based o n a sample of a little over 2,800 firms in the manufacturing sector We investigate how total factor productivity at the firm level is affect ed by the number competitors in the product market, the level of profi t in the industry the amount of debt service payments and the type of ownership.