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The Link between Innovation and Productivity in Estonia’s Service Sectors

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  • Priit Vahter

    ()

  • Jaan Masso

    ()

Abstract

The emerging literature on the characteristics of innovation processes in the service sector has paid relatively little attention to the links between innovation and productivity. In this paper we investigate how the innovation-productivity relationship differs across various subbranches of the service sector. For the analysis we use the CDM structural model consisting of equations for innovation expenditures, innovation output, productivity and exports. We use data from the community innovation surveys for Estonia. We show that innovation is associated with increased productivity in the service sector. The results indicate surprisingly that the effect of innovation on productivity is stronger in the less knowledge-intensive service sectors, despite the lower frequency of innovative activities and the results of earlier literature. Non-technological innovation only plays a positive role in some specifications, despite its expected importance especially among the service firms. An additional positive channel of the effects of innovation on productivity may function through increased exports.

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Bibliographic Info

Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number wp1012.

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Length: pages
Date of creation: 01 Mar 2011
Date of revision:
Handle: RePEc:wdi:papers:2011-1012

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Keywords: innovation; services; productivity;

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References

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  1. Dahlander, Linus & Gann, David M., 2010. "How open is innovation?," Research Policy, Elsevier, vol. 39(6), pages 699-709, July.
  2. Bruno Crépon & Emmanuel Duguet & Jacques Mairesse, 1998. "Research, Innovation and Productivity : An Econometric Analysis at the Firm Level," Working Papers 98-33, Centre de Recherche en Economie et Statistique.
  3. Rachel Griffith & Elena Huergo & Jacques Mairesse & Bettina Peters, 2006. "Innovation and Productivity Across Four European Countries," Oxford Review of Economic Policy, Oxford University Press, vol. 22(4), pages 483-498, Winter.
  4. Haskel, Jonathan & Sadun, Raffaella, 2009. "Regulation and UK Retailing Productivity: Evidence from Micro Data," IZA Discussion Papers 4028, Institute for the Study of Labor (IZA).
  5. J. A. Camacho & M. Rodriguez, 2008. "Patterns Of Innovation In The Service Sector: Some Insights From The Spanish Innovation Survey," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 17(5), pages 459-471.
  6. Jaan Masso & Priit Vahter, 2008. "Technological Innovation And Productivity In Late-Transition Estonia: Econometric Evidence From Innovation Surveys," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 61, Faculty of Economics and Business Administration, University of Tartu (Estonia).
  7. Lööf, Hans & Heshmati, Almas & Asplund, Rita & Nåås, Svein-Olav, 2001. "Innovation and Performance in Manufacturing Industries: A Comparison of the Nordic Countries," Working Paper Series in Economics and Finance 0457, Stockholm School of Economics.
  8. Rinaldo Evangelista & Maria Savona, 2002. "The Impact of Innovation on Employment in Services: Evidence from Italy," International Review of Applied Economics, Taylor & Francis Journals, vol. 16(3), pages 309-318.
  9. Alan Gerber & Daniel Kessler & Marc Meredith, 2008. "The Persuasive Effects of Direct Mail: A Regression Discontinuity Approach," NBER Working Papers 14206, National Bureau of Economic Research, Inc.
  10. Lööf, Hans & Heshmati, Almas, 2001. "On the Relationship between Innovation and Performance: A sensitivity Analysis," Working Paper Series in Economics and Finance 0446, Stockholm School of Economics, revised 01 Oct 2001.
  11. Faïz Gallouj & Maria Savona, 2009. "Innovation in services: a review of the debate and a research agenda," Journal of Evolutionary Economics, Springer, vol. 19(2), pages 149-172, April.
  12. Bart van Ark & Mary O'Mahoney & Marcel P. Timmer, 2008. "The Productivity Gap between Europe and the United States: Trends and Causes," Journal of Economic Perspectives, American Economic Association, vol. 22(1), pages 25-44, Winter.
  13. Antonio Musolesi & Jean-Pierre Huiban, 2010. "Innovation and productivity in knowledge intensive business services," Journal of Productivity Analysis, Springer, vol. 34(1), pages 63-81, August.
  14. Martin Neil Baily & Eric Zitzewitz, 2001. "Service Sector Productivity Comparisons: Lessons for Measurement," NBER Chapters, in: New Developments in Productivity Analysis, pages 419-464 National Bureau of Economic Research, Inc.
  15. MOTHE Caroline & NGUYEN Thi Thuc Uyen, 2010. "The impact of non-technological innovation on technical innovation: do services differ from manufacturing? An empirical analysis of Luxembourg firms," CEPS/INSTEAD Working Paper Series 2010-01, CEPS/INSTEAD.
  16. Luísa Ferreira Lopes & Manuel Mira Godinho, 2005. "Services Innovation and Economic Performance An analysis at the firm level," DRUID Working Papers 05-08, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  17. repec:fth:inseep:9833 is not listed on IDEAS
  18. Polder, Michael & Leeuwen, George van & Mohnen, Pierre & Raymond, Wladimir, 2009. "Productivity effects of innovation modes," MPRA Paper 18893, University Library of Munich, Germany.
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