Innovaton n Portugal: What can we learn from the CIS III? Innovaton and Productvty Pedro Moras Martns de Fara pedro.fara@dem.st.utl.pt Globelcs Academy 2005 25 May 2005
Introducton The study of the relatonshp between productvty and nnovaton s a very actve research feld. Wthn t, two topcs are crucal n order to understand ths relatonshp: 1) the dscusson about the real mpact of technologcal breakthroughs on productvty and; 2) the tme perod that must be consdered to study the real effect of nnovaton on productvty. Overall, the relatonshp between nnovaton and productvty s expected to be postve n the long run and at the macro level (countres and regons). Although, some work ndcate that n the short run and at the frm level, the relatonshp between nnovaton and productvty growth may be expected to be negatve.
postve relatonshp between levels of productvty and nnovaton Adjustment Costs negatve relatonshp between nnovaton and levels of productvty Technology and Organzatonal Rgdtes Learnng Theores Arguments Man References Innovaton - new sklls - productvty decrease New sklls necessary to adopt correctly new technologes Tme and costs of the adopton process not neglegetable - learnng cost Jovanovc and Nyarko (1996) Ahn (1999, 2001) Innovaton mples the executon of non-productvty actvtes - drop n productvty n the short run More productve frms have dffcultes to change technology When technologes appear perform less effectvely than the technologes already dffused Technology transfer mply a change on management technques n order to synchronze the frm characterstcs wth the nnovaton More productve frms may be reluctant to swtch to new technologes that would mply sgnfcant productvty losses More productve frms are those that stck more closely to exstng routnes Decson not to nnovate - level of productvty and level of organzatonal rgdty Leonard-Barton (1988, 1992) Utterback (1994) Chrstensen and Bower (1996) Chrstensen (1997) Young (1991, 1993) Benner and Tushman (2002) Trpsas and Gavett (2002) In order to contextualze the results, we descrbed three theoretcal arguments that justfy the negatve relatonshp between productvty growth and nnovaton n the short run. Perods of adopton of new technologes - adjustment costs and decrease of levels of output May be a lag between the growth n nvestment and ts benefts Adjustment costs - costs related to settng up new equpment, tranng of employees (resources used to fully utlze the captal) Durng the ntroducton of the nnovaton stage, nnovatve frms wll have a lower rate of productvty growth than non-novatve frms More productve frms are those that are more capable to deal wth adjustments costs and lqudty constrans Bessen (2001) Bernsten et al. (1999) Hall (2002) Leung (2004)
Data In order to llustrate the short run relatonshp between nnovaton and productvty, we used the CIS III database. The CIS III s a naton-wde frm-level survey that measured drectly nnovaton by askng f frms have ntroduced any new process or product n the context of the frm. In ths context and consderng that ths survey nqured a representatve sample of the Portuguese economy and that provdes complete nformaton at the frm level of the perod 1998-2000, the database s a good nstrument to analyze the relatonshp between productvty and nnovaton n the short run.
Model and Methods(1) The model developed was constructed assumng that nnovaton and productvty change are smultaneously determned n the CIS III sample. Thus, n order to avod possble bases that result from ths fact, the proposed model (that bulds on the Conceção et al. (2003) approach) s a system of two equatons: one predctng nnovaton and other predctng productvty.
Model and Methods(2) Pr( Inov 1) 0 1Log _ Turn_ Inc 2NF 3GP 4 S Log(PrdG) 0 1Inov 2Exp 3NF 4GP 5ED 6 CS S Where: Prdg Productvty Measure log (Turnover / nº Workers) Inov Innovaton Dummy Varable Exp Exports / Turnover NF Dummy Varable that ndcates f the frm was created n 1998-2000 GP Dummy Varable that ndcates f the frm s part of a group ED Share of the Workforce engaged n specalzed tasks CS Gross Investments n Captal Goods S Sector Dummy Varables Log_Turn_Inc Crtcal Identfcaton Varable - log (Turnover 1998)
Model and Methods(4) A novelty n ths study was the ncluson of a varable that measures the management and strategy of frms. Although the productvty lterature states that management and nvestment strategy nfluence the level and the dynamcs of productvty, these aspects of frm behavor are exceptonally dffcult factors to quantfy and to measure. The ncluson of ths varable can brng some new lght to the comprehenson of the productvty/nnovaton relatonshp. In order to measure the nfluence of the role of management and nvestment strategy n productvty, we consdered the log of the gross nvestments n tangble goods (CS), a varable that exposes the nvestment strategy of the frm. These knds of nvestments are seen as an ndcator of a frm s strategy towards enhancng productvty snce productvty growth s often lnked to nvestments n captal goods.
Results and Conclusons(1) Note: * Sgnfcant at 10%; ** 5%; *** 1%; Sector Dummes Varables ncluded but not reported
Results and Conclusons(2) Note: * Sgnfcant at 10%; ** 5%; *** 1%; Sector Dummes Varables ncluded but not reported
Results and Conclusons(3) In the unverse of Portuguese frms enqured by the CIS III, nnovatve frms have a lower degree of productvty growth when compared wth non-nnovatve frms The more productve frms are more nnovatve result coherent wth the Adjustment Costs theory The ncluson of the varable Gross Investment n Captal Goods gves robustness to the model
Results and Conclusons(4) From these results, some polces mplcatons can be drawn: The evaluaton of nnovaton effcency and ts mpact cannot be done mmedately: technology adopton s a complex process that does not render results nstantaneously. Therefore, when evaluatng a new technology, decson makers at the frm and state level have to consder ths tme lag between adopton and productvty mpact: a technology that s neffcent n the short run can rase productvty n the long run. Followng ths work, I wll try to dentfy the ncentves that are behnd the decson to nnovate, n the Portuguese context
Innovaton and Productvty: What can we learn from the CIS 3 Results for Portugal? Pedro Moras Martns de Fara pedro.fara@dem.st.utl.pt Globelcs Academy 2005 25 May 2005