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Technological innovation and productivity in late-transition Estonia: econometric evidence from innovation surveys

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  • Jaan Masso
  • Priit Vahter

Abstract

There is growing interest in modelling the relationship between innovation and productivity in developing and transition economies due to their attempts to establish knowledge-based economies and to increase business R&D. Our paper investigates whether there is a significant relationship between technological innovation and productivity in the manufacturing sector of Estonia. We use firm-level data for the analysis from two waves of Community Innovation Surveys (CIS3 and CIS4) from 1998-2000 and 2002-2004, which is then combined with lead financial data about firms from the Estonian Business Register in order to study the effect of innovation on future performance. We apply a structural model that involves a system of equations on innovation expenditure, innovation outcome and productivity. Our results show that during 1998-2000 only product innovation increased productivity, while in 2002-2004 only process innovation had a positive effect on productivity. This can probably be explained by the different macroeconomic conditions in the two periods. Il existe un interet croissant a la modelisation des relations entre innovation et productivite dans les pays en developpement et en transition qui cherchent a promouvoir l'economie de la connaissance et la R&D dans les entreprises. Notre article s'interroge sur l'importance de la relation entre innovation technologique et productivite dans le secteur manufacturier en Estonie Nous utilisons des donnees d'entreprises pour analyser deux vagues d'enquetes communautaires d'innovation (C3S3 et CIS4), celles de 1998-2000 et de 2002-2004, qui sont ensuite combinees avec des donnees financieres avancees du registre des entreprises estoniennes, dans le but d'etudier les effets de l'innovation sur les performances futures. Nous appliquons un modele structurel qui comporte un systeme d'equations sur les depenses d'innovation, le revenu de l'innovation et la productivite. Nos resultats montrent que durant la periode 1998-2000, seule l'innovation concernant les produits a un effet positif sur la productivite alors qu'en 2002-2004, seul le processus d'innovation a un effet positif sur la productivite. Ceci s'explique probablement par des conditions macroeconomiques differentes entre les deux periodes.

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Bibliographic Info

Article provided by Taylor and Francis Journals in its journal The European Journal of Development Research.

Volume (Year): 20 (2008)
Issue (Month): 2 ()
Pages: 240-261

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Handle: RePEc:taf:eurjdr:v:20:y:2008:i:2:p:240-261

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Keywords: productivity; innovation; Estonia;

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References

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  1. Bloom, Nicholas & Sadun, Raffaella & Van Reenen, John, 2007. "Americans Do I.T. Better: US Multinationals and the Productivity Miracle," CEPR Discussion Papers 6291, C.E.P.R. Discussion Papers.
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  10. Raul Eamets & Urmas Varblane & Kaja Sostra, 2003. "External Macroeconomic Shocks and the Estonian economy: How did the Russian Financial Crisis affect Estonian Unemployment and Foreign Trade?," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 3(2), pages 5-24, July.
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  12. José Miguel Benavente, 2002. "The Role of Research and Innovation in Promoting Productivity in Chile," Working Papers wp200, University of Chile, Department of Economics.
  13. Kadri Ukrainski & Urmas Varblane, 2005. "Sources Of Innovation In The Estonian Forest And Wood Cluster," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 36, Faculty of Economics and Business Administration, University of Tartu (Estonia).
  14. repec:fth:inseep:9833 is not listed on IDEAS
  15. Chudnovsky, Daniel & Lopez, Andres & Pupato, German, 2006. "Innovation and productivity in developing countries: A study of Argentine manufacturing firms' behavior (1992-2001)," Research Policy, Elsevier, vol. 35(2), pages 266-288, March.
  16. Johannes Stephan, 2004. "The Productivity Gap between East and West Europe: What Role for Sectoral Structures during Integration?," Development and Comp Systems 0403004, EconWPA.
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