Determinants of Innovative Activity in Canadian Manufacturing Firms

Abstract

The topic of innovation has garnered the interest of a select group of economists from Schumpeter (1939) to Nelson and Winter (1982), who have stressed that it is the key to economic growth. However, until the advent of panel data sets, there was little empirical evidence to link the innovative stance of firms and their performance. Recent work that links dynamic panel datasets on the performance of firms, and special surveys on the strategies that are being pursued by firms, has demonstrated the importance of innovation to the growth of firms. Baldwin et al. (1994) demonstrate that in small and medium-sized Canadian firms, a measure of success that is based on growth, profitability and productivity is related strongly to the emphasis that firms place on innovation. Baldwin and Johnson (1999) use a sample of entrants to show that growth in new firms depends upon whether the firm innovates. Crépon et al. (1998) find that innovation in French firms increases productivity.

We would like to thank Bronwyn Hall, Alfred Kleinknecht, Pierre Molmen and other members of the European Innovation Network for their comments. The opinions expressed herein are those of the authors and do not necessarily reflect the views of Statistics Canada.