SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

Abstract: This paper is an empirical analysis of knowledge capital and performance heterogeneity at the firm level. We apply new econometric methods to extensive data on innovation and innovative activities in Swedish manufacturing. Knowledge capital, defined as the ratio of innovation sales to total sales, is found to be a significant factor contributing to the performance heterogeneity among firms. A number of interesting results emerge. First, the results show that there is a two-way and positive relationship between firm performance and knowledge capital. This relationship holds even when we control for human capital, type of output, firm size, capital intensity, entry, merger, partial closure or exit of firms. Second, the elasticity of productivity growth with respect to knowledge capital is doubled when all innovations are substituted for radical innovations. Third, knowledge capital rises with innovation input per employee. Fourth, profitability is important for the willingness of firms to invest in innovative activities. Fifth, when controlling for differences in innovation investments and human capital, knowledge intense firms are not more innovative than labor and capital intense firms. Finally, organizational rigidities in innovation projects are found to have a significant negative impact on innovation output.

Keywords: Knowledge capital; performance heterogeneity; innovation; manufacturing; firms

JEL-codes: C51; D24; L60; O31; O32

31 pages, First version: June 13, 2000. Revised: August 15, 2000. Earlier revisions: August 14, 2000, August 15, 2000, August 15, 2000.

Download statistics

• Stockholm School of Economics
• Home page for this series

Questions (including download problems) about the papers in this series should be directed to Helena Lundin ()
Report other problems with accessing this service to Sune Karlsson ().

RePEc:hhs:hastef:0387This page generated on 2024-09-13 22:19:41.