Small Business Economics

, Volume 33, Issue 1, pp 13–33 | Cite as

Innovation and productivity in SMEs: empirical evidence for Italy

  • Bronwyn H. Hall
  • Francesca LottiEmail author
  • Jacques Mairesse


Innovation in SMEs exhibits some peculiar features that most traditional indicators of innovation activity do not capture. Therefore, in this paper, we develop a structural model of innovation that incorporates information on innovation success from firm surveys along with the usual R&D expenditures and productivity measures. We then apply the model to data on Italian SMEs from the “Survey on Manufacturing Firms” conducted by Mediocredito-Capitalia covering the period 1995–2003. The model is estimated in steps, following the logic of firms’ decisions and outcomes. We find that international competition fosters R&D intensity, especially for high-tech firms. Firm size and R&D intensity, along with investment in equipment, enhances the likelihood of having both process and product innovation. Both these kinds of innovation have a positive impact on firm’s productivity, especially process innovation. Among SMEs, larger and older firms seem to be less productive.


R&D Innovation Productivity SMEs Italy 

JEL Classifications

L26 L60 O31 O33 



We would like to thank the Mediocredito-Capitalia (now Unicredit) research department for having kindly supplied firm level data for this project. We thank also Susanto Basu, Ernie Berndt, Piergiuseppe Morone, Stéphane Robin, Mike Scherer, Enrico Santarelli, Alessandro Sembenelli, Marco Vivarelli and participants at the NBER Productivity Seminars, at the workshop “Drivers and Impacts of Corporate R&D in SMEs” held in Seville at IPTS. The views expressed by the authors do not necessarily reflect those of the Bank of Italy.


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Copyright information

© Springer Science+Business Media, LLC. 2009

Authors and Affiliations

  • Bronwyn H. Hall
    • 1
    • 2
    • 3
    • 4
  • Francesca Lotti
    • 5
    Email author
  • Jacques Mairesse
    • 2
    • 3
    • 6
  1. 1.Department of EconomicsUniversity of California at BerkeleyBerkeleyUSA
  2. 2.UNU-MERITMaastricht UniversityMaastrichtThe Netherlands
  3. 3.NBERCambridgeUSA
  4. 4.IFSLondonUK
  5. 5.Economic Research DepartmentBank of ItalyRomeItaly
  6. 6.CREST (ENSAE, Paris)Malakoff CedexFrance

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