“Do intra- and inter-industry spillovers matter? CDM model estimates for Spain”

This paper uses a structural model to analyse the impact of innovation activities, including intra- and inter-industry externalities, on the productivity of Spanish firms. To the best of our knowledge, no previous paper has examined spillover effects by adopting such an approach. Here, therefore, we seek to determine the extent to which the innovations carried out by others affect a firm’s productivity. Additionally, firm’s technology level is taken into account in order to ascertain whether there are any differences in this regard between high-tech and low-tech firms both in industrial and service sectors. The database used is the Technological Innovation Panel (PITEC) which includes 8,611 firms for the year 2009. We find that low-tech firms make the most of a range of factors, including funding and belonging to a group, to increase their investment in R&D. As expected, R&D intensity has a positive impact on the probability of achieving both product and, more especially, process innovations. Finally, innovation output has a positive impact on firm’s productivity, being greater in more advanced firms in the case of process innovations. Both intra- and inter-industry spillovers have a positive impact on firm’s productivity, but this varies with the firm’s level of technology. Thus, innovations made by firms from the same sector are more important for low-tech firms than they are for their high-tech counterparts, while innovations made by the rest of the sectors have a greater impact on high-tech firms.