Do Important Home-Made Innovations Affect Productivity Growth? Some Industry-Level Explorations*

Very first draft. Please do not quote without permission from the authors. International differences in productivity performance are often attributed to differences in innovative performance. Much empirical work supports this contention, but problems in quantifying innovative output prevent researchers from drawing a clear picture. In this paper, we try to assess the importance of innovations by linking labor productivity growth at the level of industries to various counts of patents. Since it is well-known that patented innovations are very heterogeneous regarding their importance, we construct importance indicators by means of patent citation data taken from the US Patent Office. We present descriptive statistics to reveal the technological specialization patterns of 26 countries, in terms of their focus on important innovations at the industry level. Our preliminary regressions do not find a strong relationship between the production of (important) innovations and labor productivity growth. We give a few potential explanations for this result and indicate which future plans we have to deal with these issues. *The authors thank Marcel Timmer for his assistance in setting up a concordance between the OTAF industry classification adopted by the U.S. Patent and Trademark Office and the EUKLEMS industry classification. Robert Inklaar and Gerard Ypma offered useful insights into the likely effects of deflation and currency conversion procedures adopted in the GGDC productivity databases. Edwin Stuivenwold kindly prepared the productivity and employment data. The paper partly builds on an earlier paper in which the authors were involved (Akkermans et al., 2005). A few paragraphs have been taken literally from this paper. Sponsorship of the European Commission is gratefully acknowledged.