Economic performance of Brazilian manufacturing firms: a counterfactual analysis of innovation impacts

Abstract

This article assesses if innovators outperform non-innovators in Brazilian manufacturing during 1996-2002. To do so, we begin with a simple theoretical model and test the impacts of technological innovation (treatment) on innovating firms (treated) by employing propensity score matching techniques. Correcting for the survivorship bias in the period, it was verified that, on an average, the accomplishment of technological innovations produces positive and significant impacts on the employment, the net revenue, the labor productivity, the capital productivity, and market share of the firms. However, this result was not observed for the mark-up. Especially, the net revenue reflects more robustly the impacts of the innovations. Quantitatively speaking, innovating firms experienced a 10.8-12.5 percentage points (p.p. henceforth) higher growth on employment, a 18.1-21.7 p.p. higher growth on the net revenue, a 10.8-11.9 p.p. higher growth on labor productivity, a 11.8-12.0 p.p. higher growth on capital productivity, and a 19.9-24.3 p.p. higher growth on their market share, relative to the average of the non-innovating firms in the control group. It was also observed that the conjunction of product and process innovations, relative to other forms of innovation, presents the stronger impacts on the performance of Brazilian firms.