The impact of innovation on economic performance in services

This paper explores the two-ways relationships between innovation and economic performance in services at the firm level. The empirical analysis is based on a unique longitudinal firm-level data set, which matches CIS2 data (1993-95) and a set of economic variables provided by the Italian Production Survey (1993-98). In particular, the empirical analysis aims at disentangling: i) the impact of innovation on the economic performance of firms, in terms of productivity and growth; ii) the reverse casual effect, that is the impact of past economic performance on firms’ innovation activities. The results presented show that the high level of productivity and growth boost innovation. Further, innovation has a positive impact both on growth and productivity. In particular, the higher is the level of innovation expenditure in ICTs, the better is the economic performance of firms in terms of productivity.