The effect of innovation on productivity: evidence from Turkish manufacturing firms

Abstract

This paper explores the effects of firms' innovation activities on their productivity changes systematically for Turkish manufacturing firms differentiating between different typologies of innovation. To do so, we utilize a recent and comprehensive firm level dataset over the period 2003-2014, mainly constructed on the four consecutive waves of the "Community Innovation Surveys". We employ endogenous switching methodology controlling for endogeneity and selection bias issues as well as analyzing counterfactual scenarios. The main finding of the study points to firm heterogeneity in terms of both propensity to innovate and their benefiting from innovation activities. Our results indicate that all types of innovation activity have positive effects on the productivity of firms with respect to non-innovating firms. Further, we find robust evidence for the differential impact of innovation on firm productivity across different innovation types.

Innovation success in an emerging economy: A comparison of R&D‐oriented companies in Turkey

“…In this regard, DTFs are most in need of support for internal R&D capabilities, particularly related to white collar or R&D‐related personnel. Such a form of support should enable firms to increase their absorptive capacities and consequently their ability to make use of external technological knowledge (Fazlioglu et al., 2019). Based on this overall moderating role of absorptive capacity, it is evident that otherwise only a small subset of DTFs would be able to benefit from knowledge and technology spillovers from foreign MNEs residing in the Turkish market (Lo Turco & Maggioni, 2019).…”

“…In a study by Fazlioglu et al. (2019), the authors indicate an existing positive and complementary relation between different forms of innovation, meaning that one type of innovation triggers other innovation activities of firms. In addition, the authors underline the importance of internal R&D with regard to innovation output and productivity of firms, since internal R&D activities build up important firm‐specific knowledge.…”

“…Moreover, the utilization of external R&D resources is often restricted by low levels of firms’ absorptive capacities. Therefore, policy interventions and subsidies should be allocated to firms’ internal R&D investments instead of promoting external ones (Fazlioglu et al., 2019). Nonetheless, Fındık and Beyhan (2015) find a positive relation between external collaboration and firms’ product innovation.…”

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