Innovation and Productivity in the Colombian Service and Manufacturing Industries

Abstract

The knowledge of the innovation–productivity relationship in Latin America, and particularly in the Colombian service sector, is scant. In this study, we explore such relationship comparing the Colombian service industry with manufacturing. Following the Crépon-Duguet-Mairesse empirical approach, the four major findings are as follows: Indeed, Colombian service firms undertake (technological and nontechnological) innovation processes. Regardless of the industry, the probability of innovation increases when there is investment in research and development (R&D) labs and firms are large. The more intensive innovation investment is, the higher the probability of innovation implementation. Finally, labor productivity is enhanced after the introduction of innovations.

KEY WORDS:

• Colombia
• innovation
• Latin America
• productivity
• service and manufacturing industries

Acknowledgements

A previous version of this article circulated as an Inter-American Development Bank (IDB) working paper (IDB-DP-287) under the title “Innovation and Productivity in the Colombian Service Industry.” The authors are thankful to Gustavo Crespi, Diego Aboal, Roberto Álvarez, Matteo Grazzi, and Fernando Vargas for their comments on the earlier versions of this manuscript. The authors also thank the participants of the 7th MEIDE (Micro Evidence on Innovation in Developing Economies) Conference in Santiago, Chile, and the research team of the project “Innovation and Productivity in the Service Sector,” funded by the IDB, CINVE, and IDRC. Thanks to María Angélica Samper Cortés (www.transcrear.com) for English proofreading and editing.

Notes

1. Authors such as Djellal and Gallouj (2013) and Miles (2008) developed the concept of “coterminality” to describe how within the service sector, products, processes, and consumption take place at one time and place.

2. According to Gallouj and Windrum (2009), service firms, and KIBS in particular, detect new needs, define product specifications, and act as an interface between client firms and other actors within innovation networks (e.g., suppliers and service providers). Consequently, within the service sector, the most relevant forms of innovation are those concerning the organization (i.e., organizational innovation) and its relationship with product, process, input, and market innovations (Gallouj and Windrum 2009). Innovation is then considered to be a network phenomenon rather than an isolated action.

3. Broadly speaking, such criteria are to have ten or more employees or sales of at least USD 250,000.

4. DANE officials matched the data under the provision of no access of outside observers to confidential information.

5. Before matching the surveys, the EDIT-S2 has information of nearly 1,220 service firms and 2,400 retail firms, and the EDIT-M4 contains information of about 7,683 manufacturing firms.

6. An attempt to estimate this equation including TI and NTI simultaneously was performed. The high correlation between the variables is evident, and the standard consequences related to collinearity were evident upon the standard errors of the regression output. These results are not shown, and are available upon request from the authors.

7. One issue regarding the data used in the estimation of the CDM is the reduced size of the service sector with respect to the number of firms surveyed in the EDIT-S2.

8. The estimation results for service firms do not include a dummy variable for firm exports since this information is not available for this sector. In addition, the specification does not include patent protection because only a few service firms use it.

9. In the existing literature, the importance of R&D in the services sector has been neglected.

Additional information

Funding

The authors are grateful for the IDB’s financial support.