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Effect of Internal and External Financing on Labor Productivity – (2009–2014) Panel Data Study of Ecuadorian Companies

Abstract:

This research analyzes the effect of internal and external financing on the labor productivity of Ecuadorian companies from 2009 to 2014 using data from the National Institute of Statistics and Censuses (INEC). In addition, ordinary least squares (MCO) regression for panel data is applied as an estimation strategy. The study focuses on explanatory variables (external and internal funding) and independent variables (number of employees, source of foreign capital, innovation of new services, and purchasing of machinery and equipment). The results demonstrate that external financing, the number of employees, foreign capital sources, and machinery/equipment purchases have a positive impact on labor productivity. In contrast, internal financing has no effect, while the introduction of a new service reduces labor productivity. Identifying the factors affecting Ecuadorian companies’ labor productivity is relevant for business economic development because with this information, companies could develop capabilities and strategies to improve competitiveness in the market, and consequently survival.