Business Dynamics in Recovery Times: A Comparative Perspective on Manufacturing Firms’ Performance in the European Union

Abstract

Our paper investigates the gaps in performance in the manufacturing sector between Western and Eastern European countries and attempts to analyze how enterprises from these two parts of Europe have tackled recovery after the Global financial crisis of 2007-2009. We uncover the patterns of performance in the after-crisis period and offer insights into the prospects of the manufacturing sector in the European Union, faced nowadays with a new recovery, after the coronavirus crisis. Moreover, we study these patterns in industries with different technological levels. We have selected five performance variables, namely Turnover growth rate, Turnover per employee, Wage-adjusted labor productivity, Gross operating rate, and Investment rate, and employed statistical cluster analysis, which is a multivariate data analysis technique that can detect these patterns in performance, in both its approaches: hierarchical and k-means clustering. Our findings show that the almost perfect groupings of businesses from Western, more developed economies, and Eastern, less developed ones, in all industries, with the notable exception of Portugal, are rather striking, regardless of the technological level of industries. We show that Eastern EU businesses were not the worst performers in the after-crisis period, but rather on the contrary. Certainly, they are smaller in size but have enjoyed higher labor productivity and profitability, as well as higher investment rates in all industries. This points towards a higher dynamism of smaller-sized businesses in general, and Eastern EU located ones, in particular, in the years after the Global financial crisis, which has been reflected in superior performance.

Keywords

• cluster analysis
• manufacturing
• high-tech industries
• european union
• performance