Innovation and Firms' Productivity Growth in Slovenia: Sensitivity of Results to Sectoral Heterogeneity and to Estimation Method

LICOS Discussion Paper No. 203/2008

28 Pages Posted: 9 May 2008  

Jože P. Damijan

University of Ljubljana, Slovenia - Department of International Economics

Črt Kostevc

University of Ljubljana - Faculty of Economics

Matija Rojec

University of Ljubljana - Faculty of Social Sciences

Abstract

The paper examines implications of endogenous growth theory on the relationship between firm productivity, innovation as well as productivity growth by combining information on firm-level innovation (CIS) with accounting data for a large sample of Slovenian firms in the period 1996-2002. We employ several different estimation methods in order to control for the endogeneity of innovation (Crépon-Duguet-Mairesse - CDM-approach) and idiosyncratic firm characteristics (matching and average treatment effects). We find a significant and robust link between productivity levels and firm propensity to innovate, while the results on the link between innovation activity and productivity growth are not robust to different econometric approaches. OLS estimates seem to provide some empirical support to the thesis of positive impact of innovation on productivity growth. More detailed empirical tests, however, reveal that these results are mainly driven by the exceptional performance of a specific group of services firms located in the fourth quintile with respect to size, productivity and R&D propensity measure. Estimates based on the matching techniques do not reveal any significant positive effects of innovation on productivity growth, regardless of the sectors, firm size and type of innovation.

Keywords: research and development, innovation, knowledge spillovers, productivity growth

JEL Classification: D24, F14, F21

Suggested Citation

Damijan, Jože P. and Kostevc, Črt and Rojec, Matija, Innovation and Firms' Productivity Growth in Slovenia: Sensitivity of Results to Sectoral Heterogeneity and to Estimation Method. Available at SSRN: https://ssrn.com/abstract=1131155 or http://dx.doi.org/10.2139/ssrn.1131155

Joze P. Damijan (Contact Author)

University of Ljubljana, Slovenia - Department of International Economics ( email )

Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia
+386 61 189 24 00 (Phone)
+386 61 189 26 98 (Fax)

Crt Kostevc

University of Ljubljana - Faculty of Economics ( email )

Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia

Matija Rojec

University of Ljubljana - Faculty of Social Sciences ( email )

Kardeljeva ploscad 5
Ljubljana, 1000
Slovenia

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