Firm-Specific Determinants of Productivity Gaps between East and West German Industrial Branches

This research assesses the firm-specific reasons for lower productivity levels between West and East German firms. The study is based on a unique data-base generated by field work in the two particularly important sectors of machinery manufacturers and furniture manufacturers. Our results suggest that the quality of human capital plays an important role for explaining lower productivity levels, as well as particularly networking activities, and the use of modern technologies for communication. Classifying those as management-functions beyond the organisation of the production process itself, we identify management-deficits as the main firm-specific determinants of productivity gaps between West and East German firms