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Innovation and Firm Performance in the Services Sector in Estonia

In: Innovation Systems in Small Catching-Up Economies

Author

Listed:
  • Jaan Masso

    (University of Tartu)

  • Priit Vahter

    (University of Tartu
    University of Birmingham)

Abstract

The empirical literature on innovation has devoted too little attention to the differences in relationship between innovation and productivity in various subbranches of the services sector. In this paper, we investigate how the innovation–productivity relationship varies across subbranches of the services sector. For our analysis, we employ the CDM structural model of innovation process, which consists of equations for innovation expenditures, innovation output, and productivity. We use panel data from three the community innovation surveys of Estonia. Our results show that product and process innovation are associated with higher total factor productivity (TFP) of firms in the services sector. Somewhat surprisingly, the effect of innovation on productivity is stronger in the less knowledge-intensive services sectors, despite the lower frequency of innovative activities over there. We also confirm that external knowledge linkages matter a lot in the innovation process of firms in different branches of the services sector.

Suggested Citation

  • Jaan Masso & Priit Vahter, 2012. "Innovation and Firm Performance in the Services Sector in Estonia," Innovation, Technology, and Knowledge Management, in: Elias G. Carayannis & Urmas Varblane & Tõnu Roolaht (ed.), Innovation Systems in Small Catching-Up Economies, chapter 0, pages 121-138, Springer.
    • Handle: RePEc:spr:innchp:978-1-4614-1548-0_7
    DOI: 10.1007/978-1-4614-1548-0_7
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    Cited by:

    1. Xiaoxu Dong & Cheon Yu & Yun Seop Hwang, 2021. "The Effects of Reverse Knowledge Spillover on China’s Sustainable Development: Sustainable Development Indicators Based on Institutional Quality," Sustainability, MDPI, vol. 13(4), pages 1-17, February.
    2. Samuel Godadaw Ayinaddis, 2023. "The effect of innovation orientation on firm performance: evidence from micro and small manufacturing firms in selected towns of Awi Zone, Ethiopia," Journal of Innovation and Entrepreneurship, Springer, vol. 12(1), pages 1-19, December.

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