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The Link between Innovation and Productivity in Estonia???s Service Sectors

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  • Priit Vahter

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  • Jaan Masso

    ()

Abstract

The emerging literature on the characteristics of innovation processes in the service sector has paid relatively little attention to the links between innovation and productivity. In this paper we investigate how the innovation-productivity relationship differs across various subbranches of the service sector. For the analysis we use the CDM structural model consisting of equations for innovation expenditures, innovation output, productivity and exports. We use data from the community innovation surveys for Estonia. We show that innovation is associated with increased productivity in the service sector. The results indicate surprisingly that the effect of innovation on productivity is stronger in the less knowledge-intensive service sectors, despite the lower frequency of innovative activities and the results of earlier literature. Non-technological innovation only plays a positive role in some specifications, despite its expected importance especially among the service firms. An additional positive channel of the effects of innovation on productivity may function through increased exports.

Suggested Citation

  • Priit Vahter & Jaan Masso, 2011. "The Link between Innovation and Productivity in Estonia???s Service Sectors," William Davidson Institute Working Papers Series wp1012, William Davidson Institute at the University of Michigan.
  • Handle: RePEc:wdi:papers:2011-1012
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    File URL: http://deepblue.lib.umich.edu/bitstream/2027.42/133027/1/wp1012.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Naqeeb Ur Rehman, 2017. "Self-selection and learning-by-exporting hypotheses: micro-level evidence," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 7(1), pages 133-160, April.
    2. Rehman, Naqeeb Ur, 2016. "Does Internal and External Research and Development Affect Innovation of Small and Medium-Sized Enterprises? Evidence from India and Pakistan," ADBI Working Papers 577, Asian Development Bank Institute.

    More about this item

    Keywords

    innovation; services; productivity;

    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
    • L80 - Industrial Organization - - Industry Studies: Services - - - General

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