Working Paper: NBER ID: w14594
Authors: Bronwyn H. Hall; Francesca Lotti; Jacques Mairesse
Abstract: 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: in the first, R&D intensity is linked to a set of firm and market characteristics. 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.
Keywords: Innovation; Productivity; SMEs; R&D; Italy
JEL Codes: D24; L25; L26; O30; O32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| International competition (Z28) | R&D intensity (O32) |
| R&D intensity (O32) | Process innovation (O31) |
| R&D intensity (O32) | Product innovation (O35) |
| Investment in equipment (G31) | Process innovation (O31) |
| Investment in equipment (G31) | Product innovation (O35) |
| Process innovation (O31) | Firm productivity (D21) |
| Product innovation (O35) | Firm productivity (D21) |
| Firm size (L25) | Firm productivity (D21) |
| Firm age (L26) | Firm productivity (D21) |