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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.

Suggested Citation

  • Jaan Masso & Priit Vahter, 2008. "Technological innovation and productivity in late-transition Estonia: econometric evidence from innovation surveys," The European Journal of Development Research, Taylor and Francis Journals, vol. 20(2), pages 240-261.
  • Handle: RePEc:taf:eurjdr:v:20:y:2008:i:2:p:240-261
    DOI: 10.1080/09578810802060751
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    18. repec:crs:wpaper:9833 is not listed on IDEAS
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    More about this item

    Keywords

    productivity; innovation; Estonia;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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