Firm Productivity, innovation and Financial Development

Author/Editor:

Genevieve Verdier ; Erasmus Kersting ; Era Dabla-Norris

Publication Date:

February 1, 2010

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

How do firm-specific actions-in particular, innovation-affect firm productivity? And what is the role of the financial sector in facilitating higher productivity? Using a rich firm-level dataset, we find that innovation is crucial for firm performance as it directly and measurably increases productivity. Moreover, its effects on productivity are mediated through the financial sector; firms reap the maximum benefits from innovation in countries with well-developed financial sectors. This effect is particularly important for firms in high-tech sectors, which typically have higher external financing needs.

Series:

Working Paper No. 2010/049

Subject:

English

Publication Date:

February 1, 2010

ISBN/ISSN:

9781451963250/1018-5941

Stock No:

WPIEA2010049

Pages:

36

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