earticle

영어

This paper empirically explores the links between innovation and economic performance using firm level data based on Korean 2011 CIS(Community Innovation Survey) data created by the STEPI. To examine the effects of various modes of innovation in services on firm performance, the paper controls for endogeneity of the innovation, using Probit-LS two stage Predictor Substitution procedure. In the first stage, the probit model for each innovation variable is estimated by MLE using instrument variables such as lagged sale and worker variables, Then in the second stage, the firm’s productivity model include the predicted values of the innovaton variable obtained from the probit model as an explanatory variable. The empirical results summarized as follows. First, the exogeneity is found to be rejected not only for technological innovation such as service product innovation and process innovation but also non-technological innovation such as organization and marketing innovation. These findings provide, just like in manufacturing sectors, empirical support for endogenous nature of innovation and the process of market selection in services. Thus, productivity and innovation, either technological or non-technological innovation can act as a self-reinforcing mechanism, which further boosts firm performance. Better performing firms in services are more likely to innovate and devote more their resources to innovation. Second, the empirical result shows that not only innovation is important dimension of firms’behavior but also that it is able to explain part of firms’economic performance. The results show that innovating firm outperform non-innovating firms in terms of both production and productivity levels. Third, firm size is positively associated with firm performance. Larger firms in service sectors are expected to have more production and higher productivity. Fourth, the null hypothesis that all industrial dummy variables should not affect either production or productivity can be statistically rejected for all cases. This means that sectoral difference should be considered in estimation of production and productivity. Also listed companies have higher productivity than non-listed companies in service sectors. Finally firm performance in services does not only depend on the simple service innovation but also the types of innovation activity performed as well as the amount of financial resources devoted to innovation. Overall, this paper provides empirical support on the increasing importance of innovation as enhancing factor for competitive in services as well as a crucial determinant of both production and productivity performance.