The Link between Innovation and Productivity in Estonia’s Service Sectors

Priit Vahter () and Jaan Masso ()

No wp1012, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: The emerging literature on the characteristics of innovation processes in the service sector has paid relatively little attention to the links between innovation and productivity. In this paper we investigate how the innovation-productivity relationship differs across various subbranches of the service sector. For the analysis we use the CDM structural model consisting of equations for innovation expenditures, innovation output, productivity and exports. We use data from the community innovation surveys for Estonia. We show that innovation is associated with increased productivity in the service sector. The results indicate surprisingly that the effect of innovation on productivity is stronger in the less knowledge-intensive service sectors, despite the lower frequency of innovative activities and the results of earlier literature. Non-technological innovation only plays a positive role in some specifications, despite its expected importance especially among the service firms. An additional positive channel of the effects of innovation on productivity may function through increased exports.

Keywords: innovation; services; productivity (search for similar items in EconPapers)
JEL-codes: L80 O31 O33 (search for similar items in EconPapers)
Pages: pages
Date: 2011-03-01
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: The link between innovation and productivity in Estonia's services sector (2012)
Working Paper: THE LINK BETWEEN INNOVATION AND PRODUCTIVITY IN ESTONIAN SERVICE SECTOR (2011)
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