| Abstract: |
We study the productivity implications of R&D, capital accumulation, and
innovation output for entrants and incumbents in Estonia. First, in contrast
to developed economies, a small percentage of firm engage in formal R&D, but a
much larger percentage innovate. Second, while we find no difference in the
R&D elasticity of productivity for the entrants and incumbents, the impact of
innovation output - many of which are a result of 'doing, using and
interacting' (DUI) mode of innovation - is found to be higher for the
entrants. Entrants who innovate are 21% to 30% more productive than entrants
who do not; the corresponding figures for the incumbents are 10% to 13%.
Third, despite the adverse sectoral composition typical of catching-up
economies, Estonian incumbents, who are the primary carriers of 'scientific
and technologically-based innovative' (STI) activities, are comparable to
their counterparts in developed economies in translating STI activities into
productivity gains. Fourth, while embodied technological change through
capital accumulation is found to be more effective in generating productivity
growth than R&D, the effectiveness is higher for firms engaging in R&D.
Finally, our results suggest that certain policy recommendations for spurring
productivity growth in technologically advanced economies may not be
applicable for catching-up economies. |