Refine
Document Type
- Article (2)
- Working Paper (2)
Language
- English (4)
Is part of the Bibliography
- yes (4) (remove)
Keywords
- MSMEs (2)
- R&D (2)
- business services (2)
- labor productivity (2)
- productivity slowdown (2)
- Entrepreneurship (1)
- Innovation (1)
- Productivity (1)
- Service Sector (1)
- innovation (1)
Institute
A rich literature links knowledge inputs with innovative outputs. However, most of what is known is restricted to manufacturing. This paper analyzes whether the three aspects involving innovative activity - R&D; innovative output; and productivity - hold for knowledge intensive services. Combining the models of Crepon et al. (1998) and of Ackerberg et al. (2015), allows for causal interpretation of the relationship between innovation output and labor productivity. We find that knowledge intensive services benefit from innovation activities in the sense that these activities causally increase their labor productivity. Moreover, the firm size advantage found for manufacturing in previous studies nearly disappears for knowledge intensive services.
In the context of microfirms, this paper analyzes whether the link between the three aspects involving innovative activities—R&D, innovative output, and productivity—hold for knowledge-intensive services. With especially high start-up rates and the majority of employees in microfirms, knowledge-intensive services (KIS) have a starkly different profile from manufacturing. Results from our structural models indicate that KIS firms benefit from innovation activities through increased labor productivity with highly skilled employees being similarly important compared to R&D for creating innovation output in microfirms. Moreover, the firm size advantage of large firms found for manufacturing almost disappears in KIS, with start-ups and young firms having a higher probability of initiating innovation activities and of successfully turning knowledge into innovation output than mature firms.
In Germany, the productivity of professional services, a sector dominated by SME, declined by 40 percent between 1995 and 2014. Similar developments can be observed in several other European economies. Using a German dataset with 700,000 firm-level observations, we analyze this largely undiscovered phenomenon in professional services, the fourth largest sector of the business economy in the EU-15, which provides important inputs to the economy and has experienced substantial growth in both output and employment since the turn of the millennium. We find that changes in the value chain explain about half of the decline and that increases in part-time employment account for another small part. Contrary to expectations, the entry of micro and small firms is not responsible for the decline, despite their lower productivity levels. Further, we cannot confirm the conjecture that weakening competition has led to an increase in the number of unproductive firms remaining in the markets and that this has led to a lower average productivity.
In Germany, the productivity of professional services, a sector dominated by micro and small firms, declined by 40 percent between 1995 and 2014. This productivity decline also holds true for professional services in other European countries. Using a German firm-level dataset of 700,000 observations between 2003 and 2017, we analyze this largely uncovered phenomenon among professional services, the 4th largest sector in the EU15 business economy, which provide important intermediate services for the rest of the economy. We show that changes in the value chain explain about half of the decline and the increase in part-time employment is a further minor part of the decline. In contrast to expectations, the entry of micro and small firms, despite their lower productivity levels, is not responsible for the decline. We also cannot confirm the conjecture that weakening competition allows unproductive firms to remain in the market.