Firm Productivity, innovation and Financial Development

Genevieve Verdier, Erasmus Kersting () and Era Dabla-Norris

No 2010/049, IMF Working Papers from International Monetary Fund

Abstract: How do firm-specific actions-in particular, innovation-affect firm productivity? And what is the role of the financial sector in facilitating higher productivity? Using a rich firm-level dataset, we find that innovation is crucial for firm performance as it directly and measurably increases productivity. Moreover, its effects on productivity are mediated through the financial sector; firms reap the maximum benefits from innovation in countries with well-developed financial sectors. This effect is particularly important for firms in high-tech sectors, which typically have higher external financing needs.

Keywords: WP; firm performance; dependent variable; book value; cost of capital; financial system; high-tech firm; industry dummy; innovation; labor productivity; total factor productivity; survey data; financial development.; firm productivity; enterprise manager; low-technology firm; Financial sector development; Emerging technologies; Productivity; Capacity utilization; Global; Central and Eastern Europe; Central Asia (search for similar items in EconPapers)
Pages: 36
Date: 2010-02-01
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Citations: View citations in EconPapers (34)

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Journal Article: Firm Productivity, Innovation, and Financial Development (2012)
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