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Innovation and firm-level productivity: econometric evidence from Bangladesh and Pakistan

  • Waheed, Abdul

    ()

    (UNU-MERIT)

The labour productivity impact of innovation of manufacturing firms in Bangladesh and Pakistan, a highly neglected region for such studies compared with the developed world, is studied in this paper by using World Bank Enterprise Survey data conducted in 2006. To achieve this end, we apply the Cobb-Douglas production function, augmented with innovation-related (and other expected sources of productivity) inputs in a three-equation simultaneous equations system - connecting R&D to its determinants, innovation output to R&D, and productivity to innovation output - and in a two-equation system - connecting innovation output to its determinants, and productivity to innovation output - after correction for the biases attributable to the selectivity problem of R&D and to the endogenous nature of both R&D and innovation output. Our results reveal that Bangladeshi firms are more often innovators as compared to Pakistani ones; however, the productivity output appears to be relatively large in Pakistan. We are generally not able to reject the constant returns to scale assumption. In addition, our econometric analysis indicates a strongly positive influence of both material and capital inputs on firm productivity; moreover, the productivity effect of process innovation is straightforwardly positive, but product innovation seems to be less connected to productivity outputs. Finally, we notice that the traditional production inputs (material and capital) have more significant effects on productivity output as compared to non-traditional input factors (controls in our case).

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Paper provided by United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT) in its series MERIT Working Papers with number 061.

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Date of creation: 2011
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Handle: RePEc:unm:unumer:2011061
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  1. Gustavo Crespi & Pluvia Zuniga, 2010. "Innovation and Productivity - Evidence from Six Latin American Countries," Research Department Publications 4690, Inter-American Development Bank, Research Department.
  2. Jacques MAIRESSE & Pierre MOHNEN & Elizabeth KREMP, 2005. "The Importance of R&D and Innovation for Productivity: A Reexamination in Light of the 2000 French Innovation Survey," Annales d'Economie et de Statistique, ENSAE, issue 79-80, pages 487-527.
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  5. José Miguel Benavente, 2002. "The Role of Research and Innovation in Promoting Productivity in Chile," Working Papers wp200, University of Chile, Department of Economics.
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  7. Gu, Shulin, 1999. "Implications Of National Innovation Systems For Developing Countries: Managing Change And Complexity In Economic Development," UNU-INTECH Discussion Paper Series 03, United Nations University - INTECH.
  8. Bronwyn H. Hall & Francesca Lotti & Jacques Mairesse, 2009. "Innovation and productivity in SMEs. Empirical evidence for Italy," Temi di discussione (Economic working papers) 718, Bank of Italy, Economic Research and International Relations Area.
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