Strategic Determinants of Plant Efficiency: A Study of the Effect of Scale, Technology Innovation, and Product Line Focus on Steel Minimill Performance

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The paper provides an empirical analysis of the effect of three strategic choice variables on firm performance. Size, the use of technology in innovation, and the degree of product line focus are investigated in the context of steel minimills. Findings confirm a positive relationship between plant size and performance, a negative or inverted U effect on plant vintage as technological obsolescence overrides learning effects after the plant is 'broken in', and an increased efficiency in more focused plants. The performance measurement used is the technical efficiency of each plant, estimated from the stochastic production frontier's one-sided error component.

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