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

This paper 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 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 to 12.5 % growth on employment, a 18.1 to 21.7 % growth on the net revenue, a 10.8 to 11.9 % growth on labor productivity, a 11.8 to 12.0 % growth on capital productivity and a 19.9 to 24.3 % growth on their market share, relatively to the average of the non-innovating firms in the control group. It was also observed that the conjunction of product and process innovations, relatively to other forms of innovation, presents the stronger impacts on the performance of Brazilian firms