Firm Productivity, innovation and Financial Development

By Genevieve Verdier, Erasmus Kersting, Era Dabla-Norris

February 1, 2010

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Format: Chicago

Genevieve Verdier, Erasmus Kersting, and Era Dabla-Norris. Firm Productivity, innovation and Financial Development, (USA: International Monetary Fund, 2010) accessed December 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Capacity utilization, Emerging technologies, Financial markets, Financial sector development, Production, Productivity, Technology, Total factor productivity

Keywords: Book value, Capacity utilization, Central and Eastern Europe, Central Asia, Cost of capital, Dependent variable, Emerging technologies, Enterprise manager, Financial development., Financial sector development, Financial system, Firm performance, Firm productivity, Global, High-tech firm, Industry dummy, Innovation, Labor productivity, Low-technology firm, Productivity, Survey data, Total factor productivity, WP

Publication Details

Pages:

36
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2010/049
Stock No:

WPIEA2010049
ISBN:

9781451963250
ISSN:

1018-5941

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