Firm Productivity, innovation and Financial Development
Author | : Ms.Genevieve Verdier |
Publisher | : International Monetary Fund |
Total Pages | : 37 |
Release | : 2010-02-01 |
ISBN-10 | : 9781451963250 |
ISBN-13 | : 1451963254 |
Rating | : 4/5 (50 Downloads) |
Book excerpt: How do firm-specific actions-in particular, innovation-affect firm productivity? And what is the role of the financial sector in facilitating higher productivity? Using a rich firm-level dataset, we find that innovation is crucial for firm performance as it directly and measurably increases productivity. Moreover, its effects on productivity are mediated through the financial sector; firms reap the maximum benefits from innovation in countries with well-developed financial sectors. This effect is particularly important for firms in high-tech sectors, which typically have higher external financing needs.