1 ON THE ROLE OF PROCESS INNOVATIONS ON SMES PRODUCTIVITY*

In this paper we explore in depth the direct effect of process innovations on total factor productivity growth for small and medium enterprises (SME). First, we analyse whether the ex-ante more productive SMEs are those that start introducing process innovations; then, we test whether process innovations boost SME productivity growth using matching techniques to control for the possibility that selection into introducing process innovations may not be a random process. We use a sample of Spanish manufacturing SMEs for the period 1990-2002, drawn from the Encuesta sobre Estrategias Empresariales. Our results show that the introduction of process innovations by a first-time process innovator yields an extra productivity growth as compared to a non-process innovator, and that the life span of this extra productivity growth has an inverted U-shaped form