Economic Efficiency of Knowledge Firms Using Stochastic Frontier Model

As the outputs of knowledge firms are diverse, innovative, unique, incomparable, heterogeneous, and intangible; and they have the spillover effects; the efficiency of these firms cannot be estimated precisely by output-based methods. This article proposes an activity-based method for evaluation and analysis of the economic efficiency of knowledge firms. The empirical use of this method for efficiency analysis of Iranian knowledge firms indicates that with high probability the economic inefficiency in knowledge firms is confirmed. The statistical estimations show that some of optional characteristics of the knowledge firms such as ownership type, size, and research cooperation with industry and government affect their economic inefficiency.