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Profit differentials and innovation

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  • Elena Cefis
  • Matteo Ciccarelli

Abstract

The article aims to investigate empirically the effects of innovative activities on corporate profitability, using a panel of 267 UK manufacturing firms, over the period 1988-1992. Using the Bayesian approach to, explicitly, consider heterogeneity among firms, we find: (i) a positive and well-determined effect of innovation on profits that smoothly decreases as time passes by; (ii) a difference in profitability between innovators and non-innovators, greater when the comparison is between persistent innovators and non-innovators; and (iii) a long-run persistence in profit differentials.

Suggested Citation

  • Elena Cefis & Matteo Ciccarelli, 2005. "Profit differentials and innovation," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 14(1-2), pages 43-61.
    • Handle: RePEc:taf:ecinnt:v:14:y:2005:i:1-2:p:43-61
    DOI: 10.1080/1043859042000232160
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    References listed on IDEAS

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