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Effect of Internal & 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. For this purpose, the database of the National Institute of Statistics and Censuses (INEC) is used. In addition, ordinary least squares (MCO) regression for panel data is applied as an estimation strategy. The study focuses on explanatory variables with financial characteristics (external and internal funding) and variables with commercial characteristics (number of employees, source of foreign capital, innovation of new services, and purchasing of machinery and equipment). The results demonstrate that external financing, number of employees, source of foreign capital and purchase of machinery and equipment, all have a positive impact on labor productivity. Internal financing, on the other hand, has no effect on the dependent variable. Meanwhile, the introduction of a new service reduces labor productivity. The Ecuadorian economy presents several barriers that prevent the development of national companies. These obstacles could be a lack of social and scientific awareness, an absence of innovative initiative and technological development, and deficient management of internal and external financing. Therefore, identifying the factors that affect the labor productivity of Ecuadorian companies is a relevant issue for the country's business economic development. Due to this information, the companies could develop capabilities and strategies to stay in the market and improve their competitiveness.