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Innovation and productivity in SMEs. Empirical evidence for Italy

  • Bronwyn H. Hall

    ()

    (Department of Economics, University of California at Berkeley)

  • Francesca Lotti

    ()

    (Bank of Italy)

  • Jacques Mairesse

    ()

    (CREST (ENSAE, Paris))

Innovation in SMEs exhibits some peculiar features that most traditional indicators of innovation activity do not capture. Therefore, in this paper, we develop a structural model of innovation which incorporates information on innovation success from firm surveys along with the usual R&D expenditures and productivity measures. We then apply the model to data on Italian SMEs from the �Survey on Manufacturing Firms� conducted by Mediocredito-Capitalia covering the period 1995-2003. The model is estimated in steps, following the logic of firms� decisions and outcomes. We find that international competition fosters R&D intensity, especially for high-tech firms. Firm size, R&D intensity, along with investment in equipment enhances the likelihood of having both process and product innovation. Both these kinds of innovation have a positive impact on firm�s productivity, especially process innovation. Among SMEs, larger and older firms seem to be less productive.

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Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 718.

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Date of creation: Jun 2009
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Handle: RePEc:bdi:wptemi:td_718_09
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