Profit differentials and innovation

Elena Cefis and Matteo Ciccarelli

Economics of Innovation and New Technology, 2005, vol. 14, issue 1-2, 43-61

Abstract: The article aims to investigate empirically the effects of innovative activities on corporate profitability, using a panel of 267 UK manufacturing firms, over the period 1988-1992. Using the Bayesian approach to, explicitly, consider heterogeneity among firms, we find: (i) a positive and well-determined effect of innovation on profits that smoothly decreases as time passes by; (ii) a difference in profitability between innovators and non-innovators, greater when the comparison is between persistent innovators and non-innovators; and (iii) a long-run persistence in profit differentials.

Keywords: Innovation; Profitability; Firms differentials; Bayesian estimation; Panel data models (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (77)

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DOI: 10.1080/1043859042000232160

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