Spillovers, intangibles and productivity (D5.4)

The objective of this paper is to examine how spillovers and diffusion processes affect firm productivity growth. In doing so, we analyze these channels from three different perspectives. First, we examine the role of technological progress and diffusion processes in bridging or widening productivity gaps between firms at the technological frontier and less-productive firms.

Second, we examine the impact of employee mobility on firm productivity and whether high levels of employee turnover are positively associated with productivity. We differentiate between intangibles-based employees and other employees, with the expectation that intangibles-based employees may bring innovative knowhow to the new firm (and potentially take knowhow with them when they leave). We also differentiate between employees that come from similar firms (within same NACE2 industry) and employees that come from other industries, based on the idea that employees from similar firms may possess knowhow that is more closely related to firms’ own knowhow, while the capabilities of employees from other industries may be more different.

Third, we examine the relation between firm productivity growth and growth in industry knowledge pools generated through domestic and international intangibles investments, and the role of firms’ own innovation capabilities, measured in terms of their intangible assets.
The analysis is conducted on linked employer-employee data for Danish companies in the period 2000-2016. It draws both on firm level and industry level measures of intangible assets developed and compiled as part of the GLOBALINTO project.

We find that on average the productivity gap among Danish firms has diminished over the period examined in this study, however this overall trend is the product of a number of factors. First, catching up appears to be happen further away from the productivity frontier, potentially indicating that firms with lower productivity can gain more from the diffusion of new knowledge. Second, when we examine catch up over selected sub-periods, we find these effects to be lowest in the years after the financial crisis, suggesting that there has been divergence in productivity.

We find evidence of positive effects on productivity through inflows due to hiring of new knowledge intensive employees, however we do not find and difference in effects among the mobility of staff between firms within the same industry compared to mobility from outside of the industry. Effects are strongest among R&D based staff compared to organizational or ICT based staff. Results concerning industry inflows of intangibles are mixed, making it difficult to draw any conclusions concerning the roles of these inflows both as knowledge spillovers and as indicators of strengthened industry competition. Most clear is the positive effect of organizational spillovers on firm productivity.

See the paper here