## Firm Productivity, innovation and Financial Development

_IMF Working Papers, February 1, 2010_

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## Bibliographic details
- Authors: Erasmus Kersting, Era Dabla-Norris
- Published: February 1, 2010
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451963250.001

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### Summary and main findings
- Research question: How do firm-specific actions—in particular, innovation—affect firm productivity? And what is the role of the financial sector in facilitating higher productivity?
- Core finding: Innovation is crucial for firm performance as it directly and measurably increases productivity.
- Interaction with finance: The effects of innovation on productivity are mediated through the financial sector; firms reap the maximum benefits from innovation in countries with well-developed financial sectors.
- Sectoral heterogeneity: The financial mediation effect is particularly important for firms in high-tech sectors, which typically have higher external financing needs.

### Data and scope
- Data source: A rich firm-level dataset (survey data referenced in keywords).
- Geographic scope indicated as Global, with mentions of Central and Eastern Europe and Central Asia in keywords.
- Firm types examined include high-tech firm and low-technology firm distinctions.
- Productivity measures referenced: labor productivity and total factor productivity.

### Policy-relevant implications
- Strengthen financial sector development to amplify the productivity gains from firm-level innovation.
- Support for external finance mechanisms is especially crucial for high-tech firms with higher external financing needs.
- Policies that facilitate access to finance can increase the returns to innovation and thereby improve firm performance.

### Key topics and technical terms covered
- Capacity utilization
- Emerging technologies
- Financial markets
- Financial sector development / financial system
- Production and Productivity
- Technology and Total factor productivity
- Additional technical terms from keywords: book value, cost of capital, dependent variable, enterprise manager, industry dummy, survey data, WP

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/firm-productivity-innovation-and-financial-development-23626_