Technological spillover, innovation, and productivity: An empirical analysis at the firm level

Innovation is one of the most important sources of firm performance and long run economic growth. The fact that the technological knowledge emerging in the innovation process is non-rivalry and non-excludable allows it to be used by other agents after it was created. This phenomenon, which is called knowledge spillovers, affects innovation activities and performances of firms in different ways. In this context, the aim of the study is to examine the impact of intra-sectoral technological knowledge spillovers on innovation investment, innovation outcome, and productivity in manufacturing and service firms in Turkey. The findings obtained by using TURKSTAT Innovation Survey micro dataset and the CDM Model developed by Crépon, Duguet and Mairesse (1998) indicate that spillovers reduce the probability of innovation investment decision and the level of innovation investment, increase the probability of product and process innovations but do not affect productivity directly in manufacturing firms. In service firms, however, the effect of spillovers on innovation and productivity was not observed.