Innovation, Technology Scope and Firm Productivity

Abstract

In this paper, we examine the relationship between productivity and innovation, using the U.S. manufacturers' patent data from 1976-2006. First, we investigate whether productive firms actively participate in innovation in terms of having more patents. We then examine whether their innovation activities are involved in a wide spectrum of technological categories. Moreover, we are interested in, to successfully develop a new patent in a certain technological field, whether productive firms need to cite more or less patents within the field and/or across various related fields. The firm-level productivity is estimated as the total factor productivity (TFP). We find that: (1) productivity is positively correlated with the number of patents granted and the number of technological categories for these patents; and (2) productivity is positive correlated with the number of citations per granted patent, and is also positively correlated with the number of technological categories for cited patents per granted patent. Whereas the former finding indicates that productive firms actively conduct research and their innovation is involved in different technological fields, the latter suggests that, to develop a new patent, productive firms are capable of learning from cited patents in various technological fields.

Keywords: Productivity, Backward Citations, Innovation, Knowledge Stock

JEL Classification: D22, O31