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Innovation, R&D Investment and Productivity: Uruguayan Manufacturing Firms

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  • Adriana Cassoni
  • Magdalena Ramada

Abstract

Uruguay’s inability to sustain high levels of economic growth cannot be fully explained by external shocks, the prevailing institutional setting or the level of human capital accumulation. Instead, low investment in knowledge capital stands as a most likely explanation. This hypothesis is supported by empirical evidence analyzed in this study. Returns on innovation were found to be significant, promoting a non-negligible acceleration of labor productivity gains. However, the propensity to innovate and the intensity of the effort expended critically depend on the firm’s already having a high internal efficiency level. As firms’ behavior is differentiated depending on the type of innovation output pursued, the significantly higher frequency of processes relative to product-innovative firms is matched by the larger impact of novel processes with respect to products on labor productivity. However, the degree of novelty of process innovation is significantly inferior to that of product innovation. The research points to inadequate choices of input mixes as the underlying cause. Policy recommendations center on finding adequate channels to generate and disseminate information on the optimal input mixes depending on the type of innovation output sought.

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Bibliographic Info

Paper provided by Inter-American Development Bank, Research Department in its series Research Department Publications with number 4680.

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Date of creation: Aug 2010
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Handle: RePEc:idb:wpaper:4680

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Keywords: Innovation input; Innovation output; Productivity growth; CDM model;

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  1. Lööf, Hans & Heshmati, Almas, 2000. "Knowledge Capital and Performance Heterogeneity: A Firm Level Innovation Study," Working Paper Series in Economics and Finance 387, Stockholm School of Economics, revised 14 Aug 2000.
  2. Bruno Crepon & Emmanuel Duguet & Jacques Mairesse, 1998. "Research, Innovation, and Productivity: An Econometric Analysis at the Firm Level," NBER Working Papers 6696, National Bureau of Economic Research, Inc.
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Cited by:
  1. Gustavo Crespi & Pluvia Zuniga, 2010. "Innovation and Productivity - Evidence from Six Latin American Countries," Research Department Publications 4690, Inter-American Development Bank, Research Department.

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