Innovation, Machine Replacement and Productivity

Omar Licandro (), Luis Puch and Maroto Illera, María Reyes

No 5422, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper explores the role of replacement and innovation in shaping investment and productivity during episodes of lumpy adjustment in capital. To this purpose we use a rich firm-level panel of Spanish manufacturing data that combines information on equipment investment and firm's strategies. Investment concentrates on episodes of high investment, or investment spikes, but its nature depends upon observable heterogeneity. We find evidence of replacement activity for firms involved in neither process innovation nor plant expansion. Then, we explore how large investment episodes transmit into the evolution of productivity under different innovative strategies. We find that productivity increases after an investment spike in innovative firms. However, long learning curves seem to be associated with innovative investments.

Keywords: Investment spikes; Machine replacement; Technological innovation; Labour productivity; Learning effects (search for similar items in EconPapers)
JEL-codes: C33 E22 L60 (search for similar items in EconPapers)
Date: 2005-12
New Economics Papers: this item is included in nep-eff and nep-ino
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Citations: View citations in EconPapers (4)

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Working Paper: Innovation, Machine Replacement and Productivity (2005)
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