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Demand and innovation in productivity growth

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Author Info

  • Francesco Crespi
  • Mario Pianta

Abstract

The labour productivity impact of demand and innovation is investigated in this paper combining insights from the Kaldorian and Schumpeterian traditions. After a review of studies in such traditions, a general model is proposed for explaining productivity growth in European manufacturing and service industries in the late 1990s, followed by two distinct specifications for the industries oriented toward product innovation, and for those where process innovation dominates. The empirical analysis is based on the match of the SIEPI-CIS2 database developed at the University of Urbino and Eurostat Input-Output Tables at the industry level, for 22 manufacturing sectors and 10 services sectors. Six European countries are considered: Germany, France, Italy, the Netherlands, Portugal and the United Kingdom. The results show that productivity growth in European industries can be explained by a combination of technology factors and demand dynamics, confirming the complementarity of technology and demand effects. On the demand side, household consumption emerges as the most pervasive component of demand, able to stimulate greater efficiency in all manufacturing and service industries. Investment also has a role, focused however on the capital goods producing industries. On the technology side, the mechanisms of productivity growth are fundamentally different in the industries oriented towards product innovation and in those dominated by process innovation. This evidence supports the view that innovation in firms and industries can be associated to two contrasting strategies, searching either for technological competitiveness, through knowledge generation, product innovation and expansion of new markets, or aiming at greater cost competitiveness, through job reductions, labour saving investment, flexibility and restructuring.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/02692170802407429
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal International Review of Applied Economics.

Volume (Year): 22 (2008)
Issue (Month): 6 ()
Pages: 655-672

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Handle: RePEc:taf:irapec:v:22:y:2008:i:6:p:655-672

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Related research

Keywords: productivity; demand; product and process innovation;

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Citations

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Cited by:
  1. Frank Leung & Gaofeng Han & Kevin Chow, 2009. "Financial Services Sector as a Driver of Productivity Growth in Hong Kong," Working Papers 0914, Hong Kong Monetary Authority.
  2. Evangelista, Rinaldo & Vezzani, Antonio, 2010. "The economic impact of technological and organizational innovations. A firm-level analysis," Research Policy, Elsevier, vol. 39(10), pages 1253-1263, December.
  3. Francesco Crespi & Mario Pianta, 2008. "Diversity in innovation and productivity in Europe," Journal of Evolutionary Economics, Springer, vol. 18(3), pages 529-545, August.
  4. Bogliacino, Francesco & Pianta, Mario, 2011. "Engines of growth. Innovation and productivity in industry groups," Structural Change and Economic Dynamics, Elsevier, vol. 22(1), pages 41-53, February.
  5. Matteo Lucchese, 2011. "Innovation, demand and structural change in Europe," Working Papers 1109, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2011.
  6. Antonelli,Cristiano & Gehringer,Agnieszka, 2012. "Knowledge externalities and demand pull: The European evidence," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 201214, University of Turin.
  7. Waheed, Abdul, 2011. "Innovation and firm-level productivity: econometric evidence from Bangladesh and Pakistan," MERIT Working Papers 061, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  8. Bogliacino, Francesco & Lucchese, Matteo & Pianta, Mario, 2013. "Job creation in business services: Innovation, demand, and polarisation," Structural Change and Economic Dynamics, Elsevier, vol. 25(C), pages 95-109.
  9. Francesco Bogliacino & Matteo Lucchese & Mario Pianta, 2011. "Job creation in business services:Innovation, Demand, Polarisation," Working Papers 1107, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2011.
  10. Bogliacino, Francesco & Pianta, Mario, 2010. "Innovation and Employment: a Reinvestigation using Revised Pavitt classes," Research Policy, Elsevier, vol. 39(6), pages 799-809, July.
  11. Flacher, David & Gastaldo, Sylviane & Lorenzi, Jean-Hervé & Villemeur, Alain, 2010. "Structure de consommation, innovation et régimes de croissance," Economics Papers from University Paris Dauphine 123456789/5053, Paris Dauphine University.
  12. Waheed, Abdul, 2011. "Innovation and firm-level productivity: econometric evidence from Bangladesh and Pakistan," MERIT Working Papers 061, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  13. Storm, Servaas & Naastepad, C.W.M, 2012. "Wage-led or profit-led supply : wages, productivity and investment," ILO Working Papers 470930, International Labour Organization.
  14. Filippetti, Andrea & Archibugi, Daniele, 2011. "Innovation in times of crisis: National Systems of Innovation, structure, and demand," Research Policy, Elsevier, vol. 40(2), pages 179-192, March.

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