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Productivity, Innovation Creation and Absorption, and R&D: Micro Evidence for Italy

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Disciplines
  • Mathematics

Abstract

By exploiting a rich firm level database, this paper presents novel empirical evidence on the impact that the introduction of process and product innovations exerts on productivity, as well as on the role played by R&D and fixed capital investment in enhancing the likelihood of introducing innovations at the firm level. Our results imply that process innovation has a large impact on productivity. Furthermore, R&D spending is strongly positively associated with the probability of introducing a new product, whereas fixed capital spending increases the likelihood of introducing a process innovation. The latter result rejects the fact that new technologies are frequently embodied in new capital goods. However, the effect of fixed investment on the probability of introducing a process innovation is magnified by R&D spending internal to the firm. This implies that, in our sample, R&D affects productivity growth by facilitating the absorption of new technologies.

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