Innovation height, spillovers and tfp growth at the firm level: Evidence from French manufacturing

Abstract

The author examines the contribution of incremental and radical innovations to total factor productivity (TFP) growth at the firm level. The first part of our analysis is dedicated to the determinants of innovation and reveals two different innovation regimes. On the one hand, radical innovations rely strongly on firm-level spillovers, including property rights, and formal internal research, whereas on the other hand, incremental innovations rely mostly on the adoption of equipment goods accompanied by informal research. It is found that radical innovations are the only significant contributors to TFP growth, so that innovation height matters. Evidences show that TFP growth is better represented by an upward shift of the production function than by a continuous innovation measure. Overall, the growth gains found are comparable to the ones of the previous studies.