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Masso, Jaan; Tiwari, Amaresh K.
Technological forecasting & social change, February 2024, 2024-02-00, Letnik: 199Journal Article
Considering the importance of innovation activities, especially that of young firms, for aggregate productivity growth, the study, using Estonian Community Innovation Survey (CIS) data, compares the productivity implications of R&D, capital accumulation, and innovation output for entrants and incumbents and contrasts the findings to those for Germany, a representative developed economy. First, in contrast to the developed economies, the percentage of innovating firms is much larger than the percentage that invests in R&D, which indicates the prevalence of non-R&D, such as ‘doing, using, and interacting’ (DUI), mode of innovation. Second, contrary to findings for the developed economies, the impact of R&D on productivity for the entrants and incumbents does not differ. However, the impact of innovation output – many of which are a result of DUI mode – on productivity is much higher for the entrants. Third, despite the adverse sectoral composition typical of catching-up economies, Estonian incumbents, who are the primary carriers of ‘scientific and technologically-based innovative’ (STI) activities, are as good as German incumbents in translating R&D into productivity gains. Fourth, while embodied technological change through capital accumulation is found to be more effective than R&D for improving productivity, the effectiveness is higher for R&D performing firms. Our results suggest that certain policy recommendations for spurring productivity growth in developed economies may be unsuitable for catching-up economies. •Productivity impacts of R&D and innovations – mostly due to DUI mode – are estimated.•DUI mode of innovation is more prevalent than the STI mode among Estonian firms.•Entrants reap higher benefits from own innovations than incumbents.•Incumbents reap similar benefits from R&D as incumbents in developed economies.•Growth policies for developed economies may be unsuitable for catching-up countries.
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