Firm Productivity, Innovation and Financial Development

36 Pages Posted: 2 Mar 2010

See all articles by Geneviève Verdier

Geneviève Verdier

affiliation not provided to SSRN

Erasmus Kersting

Southern Methodist University (SMU)

Era Dabla-Norris

International Monetary Fund (IMF)

Date Written: February 2010

Abstract

How do firm-specific actions-in particular, innovation-affect firm productivity? And what is the role of the financial sector in facilitating higher productivity? Using a rich firm-level dataset, we find that innovation is crucial for firm performance as it directly and measurably increases productivity. Moreover, its effects on productivity are mediated through the financial sector; firms reap the maximum benefits from innovation in countries with well-developed financial sectors. This effect is particularly important for firms in high-tech sectors, which typically have higher external financing needs.

Keywords: Access to capital markets, Capital, Cross country analysis, Development, Economic growth, Financial sector, Industrial production, Labor productivity, Private sector, Productivity

Suggested Citation

Verdier, Geneviève and Kersting, Erasmus and Dabla-Norris, Era, Firm Productivity, Innovation and Financial Development (February 2010). IMF Working Paper No. 10/49, Available at SSRN: https://ssrn.com/abstract=1562417

Geneviève Verdier (Contact Author)

affiliation not provided to SSRN

No Address Available

Erasmus Kersting

Southern Methodist University (SMU) ( email )

6212 Bishop Blvd.
Dallas, TX 75275
United States

Era Dabla-Norris

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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