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Innovation Types and Productivity Growth: Evidence from Korean Manufacturing Firms

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  • Keunjae Lee
  • Sang-Mok Kang

Abstract

The purpose of this paper is to investigate productivity growth according to three types of innovation: product innovation, product improvement, and process innovation, using firm-level data from the Korea Innovation Survey 2002 about Korean manufacturing companies. This study is conducted in two steps. The first step measures firm-level Malmquist productivity index by data envelopment analysis (DEA). The second step estimates econometric regression models by weighted least square utilizing the productivity index as a dependent variable and each of the innovation types and other characteristics of firms as independent variables. The empirical results partly support the idea that the types of innovation matter in productivity growth. Specifically, process innovation may result in higher productivity performance than product innovation in the short run. This result stems from the difference in efficiency growth when productivity growth is decomposed into two components: efficiency growth and technical growth. That is, product innovation by definition involves product development and radical innovation and so, it can deteriorate efficiency growth relative to other types of innovation due to the process of product development and the adjustments that are needed to new innovations whereas process innovation is implemented to reduce defects, lead time, costs and other factors, and as such is very efficiency orientated. Consequently it helps improve efficiency growth.

Suggested Citation

  • Keunjae Lee & Sang-Mok Kang, 2007. "Innovation Types and Productivity Growth: Evidence from Korean Manufacturing Firms," Global Economic Review, Taylor & Francis Journals, vol. 36(4), pages 343-359.
  • Handle: RePEc:taf:glecrv:v:36:y:2007:i:4:p:343-359
    DOI: 10.1080/12265080701694512
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    Citations

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    Cited by:

    1. Pietro Cova & Massimiliano Pisani & Alessandro Rebucci, 2010. "Macroeconomic Effects of China’s Fiscal Stimulus," Research Department Publications 4689, Inter-American Development Bank, Research Department.
    2. Roberto Álvarez & Mario Canales, 2017. "Impacto de los Obstáculos al Conocimiento en la Innovación de las Empresas Chilenas," Working Papers wp452, University of Chile, Department of Economics.
    3. Fagerberg, Jan & Srholec, Martin & Verspagen, Bart, 2010. "Innovation and Economic Development," Handbook of the Economics of Innovation, Elsevier.
    4. Ali Murad Syed & Zahid Riaz & Abdul Waheed, 2016. "Innovation, Firm Performance And Riskiness: Evidence From The Leading Worldwide Innovative Firms," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 20(07), pages 1-19, October.
    5. Crespi, Gustavo & Zuniga, Pluvia, 2012. "Innovation and Productivity: Evidence from Six Latin American Countries," World Development, Elsevier, vol. 40(2), pages 273-290.
    6. M. Constanza Demmel & Juan A. Máñez & María E. Rochina-Barrachina & Juan A. Sanchis-Llopis, 2013. "Innovation and productivity: evidence for 4 Latin American countries manufacturing industry," Working Papers 1307, Department of Applied Economics II, Universidad de Valencia.
    7. Barasa, Laura & Knoben, Joris & Vermeulen, Patrick & Kimuyu, Peter & Kinyanjui, Bethuel, 2017. "Institutions, resources and innovation in East Africa: A firm level approach," Research Policy, Elsevier, vol. 46(1), pages 280-291.
    8. Crespi G.A. & Tacsir E. & Vargas F., 2014. "Innovation dynamics and productivity : evidence for Latin America," MERIT Working Papers 092, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).

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