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On the contribution of innovation to multi-factor productivity growth

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Author Info
George Van Leeuwen
Luuk Klomp
Abstract

We embed the innovation production function in a model that analyzes the impact of innovation output on manufacturing multi-factor productivity (MFP) growth. We combine a market share model with a gross output production function. This revenue approach enables a 'demand-shift’ interpretation of the contribution of innovation to MFP growth. We apply different sets of instrumental variables and different estimation methods to estimate simultaneously the returns from innovation investment to innovation output, the contribution of innovation output to productivity growth and the feedback link running from a firm’s overall sales performance to its innovation endeavor. We draw our empirical results from the second Community Innovation Survey (CIS-2) for the Netherlands. The estimation results from our model show that the impact of innovation differs between measures of firm performance, and that, in our data, the revenue function approach yields more sensible results for the contribution of innovation to MFP growth than the value-added production function framework. Furthermore, the results show that the estimation of return on innovation investment benefits from the inclusion of more information on the technological environment of the firm.

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Publisher Info
Article provided by Taylor and Francis Journals in its journal Economics of Innovation and New Technology.

Volume (Year): 15 (2006)
Issue (Month): 4-5 (June)
Pages: 367-390
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Handle: RePEc:taf:ecinnt:v:15:y:2006:i:4-5:p:367-390

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Related research
Keywords: Innovation Research Technological opportunities Simultaneous-equation models Economic performance Productivity

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Stéphane Lhuillery, 2006. "Voluntary technological disclosure as an efficient knowledge management device: An empirical study," Economics of Innovation and New Technology, Taylor and Francis Journals, vol. 15(4-5), pages 465-491, June. [Downloadable!] (restricted)
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  2. Klette, Tor Jakob & Griliches, Zvi, 1996. "The Inconsistency of Common Scale Estimators When Output Prices Are Unobserved and Endogenous," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(4), pages 343-61, July-Aug.. [Downloadable!] (restricted)
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  3. Griliches, Z. & Mairesse, J., 1997. "Production Functions: The Search for Identification," Papers 9730, Institut National de la Statistique et des Etudes Economiques-.
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  4. Zvi Griliches & Jacques Mairesse, 1981. "Productivity and R and D at the Firm Level," NBER Working Papers 0826, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Cohen, Wesley M & Klepper, Steven, 1996. "A Reprise of Size and R&D," Economic Journal, Royal Economic Society, vol. 106(437), pages 925-51, July. [Downloadable!] (restricted)
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  1. Gustavo Crespi & Chiara Criscuolo & Jonathan E. Haskel & Matthew Slaughter, 2008. "Productivity Growth, Knowledge Flows, and Spillovers," NBER Working Papers 13959, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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