The effect of participation in Denmark’s Innovation Network program

This paper investigates Denmark’s Innovation Network program which aims to foster cooperation and knowledge sharing on research and innovation between knowledge institutions and companies in an effort to promote knowledge-based growth and productivity. Consistent with recent research on the effects of business network formation, this paper finds that participation in the Innovation Network increases labor productivity and total factor productivity by almost 7 and 13 percent respectively after four years. In addition, participants in the Innovation Network program are about 5 percentage points more likely to participate in other Danish innovation programs in the subsequent four years, explaining one mechanism by which the Innovation Network facilitates productivity growth. Generally, those firms with lower than (industry) median levels of full time equivalent employees realize the largest benefits from program participation. Despite small sample sizes, evidence that particular networks experience even larger gains is presented.