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Innovation Versus Diffusion: Determinants of Productivity Growth Among Japanese Firms


  • Kiyohiko G. Nishimura

    (Policy Board, Bank of Japan)

  • Takanobu Nakajima

    (Faculty of Business and Commerce, Keio University)

  • Kozo Kiyota

    (Faculty of Business Administration, Yokohama National University)


This paper presents a model of firm-level productivity growth that distinguishes between innovation and technology diffusion, and then applies the model to a large-scale data set of Japanese manufacturing and non-manufacturing firms between 1994 and 2000. We find both innovation and diffusion are important factors in firm-level productivity growth. Results also suggest that innovation comes not only directly from R&D activities, but also indirectly from patent purchases and imports. Previously, patent purchases and imports were considered as sources of technology diffusion rather than innovation. In fact, we find patent purchases are more effective in this regard than R&D expenditure.

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  • Kiyohiko G. Nishimura & Takanobu Nakajima & Kozo Kiyota, 2005. "Innovation Versus Diffusion: Determinants of Productivity Growth Among Japanese Firms," CIRJE F-Series CIRJE-F-350, CIRJE, Faculty of Economics, University of Tokyo.
  • Handle: RePEc:tky:fseres:2005cf350

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    1. Nishimura, Kiyohiko G. & Nakajima, Takanobu & Kiyota, Kozo, 2005. "Does the natural selection mechanism still work in severe recessions?: Examination of the Japanese economy in the 1990s," Journal of Economic Behavior & Organization, Elsevier, vol. 58(1), pages 53-78, September.
    2. Jonathan E. Haskel & Sonia C. Pereira & Matthew J. Slaughter, 2007. "Does Inward Foreign Direct Investment Boost the Productivity of Domestic Firms?," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 482-496, August.
    3. Dale W. Jorgenson, 2001. "Information Technology and the U.S. Economy," American Economic Review, American Economic Association, vol. 91(1), pages 1-32, March.
    4. Aitken, Brian & Harrison, Ann & DEC, 1994. "Do domestic firms benefit from foreign direct investment? Evidence from panel data," Policy Research Working Paper Series 1248, The World Bank.
    5. Lee, Jong-Wha, 1995. "Capital goods imports and long-run growth," Journal of Development Economics, Elsevier, vol. 48(1), pages 91-110, October.
    6. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
    7. Timothy Dunne & Mark J. Roberts & Larry Samuelson, 1989. "The Growth and Failure of U. S. Manufacturing Plants," The Quarterly Journal of Economics, Oxford University Press, vol. 104(4), pages 671-698.
    8. Kiyohiko G. Nishimura & Takanobu Nakajima & Kozo Kiyota, 2005. "Productivity Convergence at the Firm Level," CIRJE F-Series CIRJE-F-341, CIRJE, Faculty of Economics, University of Tokyo.
    9. Dowrick, Steve & Nguyen, Duc-Tho, 1989. "OECD Comparative Economic Growth 1950-85: Catch-Up and Convergence," American Economic Review, American Economic Association, vol. 79(5), pages 1010-1030, December.
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