Too big to fail?: Evidence from global steel companies

Abstract

This paper examines the total factor productivity (TFP) growth, technical change, and scale components of the global top 25 steel and iron companies between 2006 and 2012. An econometric approach is used to conduct the empirical investigation, estimating a production function for the sample. Our findings reveal that: i) the quadratic production function is appropriate for describing the production function, ii) TFP displayed a decreasing trend before 2008, followed by an increase in the subsequent years, iii) technical change is the primary contributor to TFP growth, iv) scale components remain relatively constant over time, and v) the optimal production size for the sample is approximately 22 to 32 million metric tonnes. These empirical findings are applied in the developing policies related to TFP growth and technological advancements and contribute to solving the overcapacity problem of steel companies.