SSE/EFI Working Paper Series in Economics and Finance
Knowledge Capital and Performance Heterogeneity: A Firm Level Innovation Study
() and Almas Heshmati
Abstract: This paper is an empirical analysis of knowledge capital
and performance heterogeneity at the firm level. We apply new econometric
methods to extensive data on innovation and innovative activities in
Swedish manufacturing. Knowledge capital, defined as the ratio of
innovation sales to total sales, is found to be a significant factor
contributing to the performance heterogeneity among firms. A number of
interesting results emerge. First, the results show that there is a two-way
and positive relationship between firm performance and knowledge capital.
This relationship holds even when we control for human capital, type of
output, firm size, capital intensity, entry, merger, partial closure or
exit of firms. Second, the elasticity of productivity growth with respect
to knowledge capital is doubled when all innovations are substituted for
radical innovations. Third, knowledge capital rises with innovation input
per employee. Fourth, profitability is important for the willingness of
firms to invest in innovative activities. Fifth, when controlling for
differences in innovation investments and human capital, knowledge intense
firms are not more innovative than labor and capital intense firms.
Finally, organizational rigidities in innovation projects are found to have
a significant negative impact on innovation output.
Keywords: Knowledge capital; performance heterogeneity; innovation; manufacturing; firms; (follow links to similar papers)
JEL-Codes: C51; D24; L60; O31; O32; (follow links to similar papers)
31 pages, June 13, 2000, Revised August 15, 2000
- This paper is published as:
Lööf, Hans and Almas Heshmati, (2002), 'Knowledge Capital and Performance Heterogeneity: A Firm Level Innovation Study', International Journal of Production Economics, Vol. 76, No. 1, pages 61-85
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