NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Innovation and Productivity in SMEs: Empirical Evidence for Italy

Bronwyn H. Hall, Francesca Lotti, Jacques Mairesse

NBER Working Paper No. 14594
Issued in December 2008
NBER Program(s):Industrial Organization, Productivity, Innovation, and Entrepreneurship

Innovation in SMEs exhibits some peculiar features that most traditional indicators of innovation activity do not capture. Therefore, in this paper, we develop a structural model of innovation which incorporates information on innovation success from firm surveys along with the usual R&D expenditures and productivity measures. We then apply the model to data on Italian SMEs from the "Survey on Manufacturing Firms" conducted by Mediocredito-Capitalia covering the period 1995-2003. The model is estimated in steps, following the logic of firms' decisions and outcomes: in the first, R&D intensity is linked to a set of firm and market characteristics. We find that international competition fosters R&D intensity, especially for high-tech firms. Firm size, R&D intensity, along with investment in equipment enhances the likelihood of having both process and product innovation. Both these kinds of innovation have a positive impact on firm's productivity, especially process innovation. Among SMEs, larger and older firms seem to be less productive.

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Document Object Identifier (DOI): 10.3386/w14594

Published: Bronwyn Hall & Francesca Lotti & Jacques Mairesse, 2009. "Innovation and productivity in SMEs: empirical evidence for Italy," Small Business Economics, Springer, vol. 33(1), pages 13-33, June. citation courtesy of

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