Economics of innovation, productivity and growth

This doctoral research studies the deeper drivers of innovation, productivity and growth as well as the interlinkages between these three aspects. The thesis is organized as follows: Chapter 1 places the motivation of this research within the context of the wider body of research in the fields of economics of innovation, productivity and growth. It sets out the main aspirations of this research, followed by a brief outline of the research. Chapter 2 explores a wider set of innovation drivers driving firm growth, combining analysis of formal R&D processes promoted by growth theories alongside informal R&D linkages emphasized by national systems of innovation (NSI). The main goal is to distinguish primary drivers from secondary drivers, by examining the differences in key forces driving firm revenue levels versus those driving firm revenue growth. This hypothesis is tested through a dataset of 27 European economies over the period of 1996-2010, controlling also for globalization and industrial organizational drivers. Findings reveal that informal R&D linkages appear to be the primary drivers needed to establish firm revenue levels, while formal R&D investment is needed as a secondary driver to spur firm revenue growth. Chapter 3 delves into the structural drivers of productivity. Using an adaptation of the economic development framework, the Lewis model, this study proposes that country level labour productivity may be driven structurally by the movement of resources from smaller firm to larger firm-size structures. To enable this analysis, a new database is built up at sector level for the 32 European economies between 2000-2012. The contribution of firm-sizes to country productivity is measured through isolating classifications of small, medium and large firms, alongside control variables capturing growth theory drivers, globalization, credit conditions and monetary lending policies. Large firms are indeed found to be the most significant firm structure shaping country labour productivity. Chapter 4 examines whether firm independence, previously not considered critical for firm growth, may indeed be an important criterion to enable scale up of innovative firms into successful frontier large firms. To shed light on the role of independence, the study examines the drivers of firm growth and the policy tools used to support firm growth – with innovative independent firms separately assessed from overall innovative firms. Using firm level dataset for all UK sectors between 2006-2016, policy tax and financing tools supporting start-up, growth and merger activity are examined alongside growth theory drivers, globalization and monetary lending policy. The empirical analysis reveals that independent firms reap much higher growth, with age of independence delivering a bonus growth dividend. Finally, Chapter 5 summarizes the findings of this thesis, listing the limitations of the analysis alongside future potential areas of research