Innovation and Productivity in the Colombian Service Industry

This paper presents the results of a study on the ways that innovation and productivity are connected in the Colombian manufacturing and service industry. Using data from the Manufacturing Innovation Survey (2007-2008) and the Service Innovation Survey (2008-2009), the paper addresses two main questions: first, whether patterns of innovations differ among manufacturing and services industries, and second, whether service firms innovate, and, if so, whether their innovation approach differs from that of manufacturing. The main findings are (1) that service firms engage in process innovation, both technological and nontechnological; (2) that the probability of undertaking innovation increases with investment in R&D labs and firm size, regardless of the industry; and (3) that the more intensive the investment in innovation, the higher the probability of introducing innovations. The econometric results show that the response is higher in manufacturing than in services. Finally, labor productivity is greatly enhanced by the introduction of innovations, although surprisingly the estimated coefficient shows that the effect is larger for service industries than for manufacturing industries.