Out of Equilibrium Profit and Innovation

Cristiano Antonelli and Giuseppe Scellato
Additional contact information
Giuseppe Scellato: University of Turin, http://www.est.unito.it/

Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio Carlo Alberto. WP series from University of Turin

Abstract: Innovation is the result of intentional decision-making that takes place in out-of-equilibrium conditions. The farther is profitability from the average and the deeper the out-of-equilibrium conditions. The farther away is the firm from equilibrium and the stronger the likelihood for innovation to take place. The hypothesis of a U-relationship between levels of profitability and innovative activity, as measured by the rates of increase of total factor productivity, is articulated and tested. The evidence of a large sample of 7000 Italian firms in the years 1996-2005 confirms that a strong causal relation holds between the quadratic specification of profitability and the growth rates of total factor productivity. The results are robust to different approaches to evaluate productivity growth rates.

Pages: 35 pages
Date: 2008-07
New Economics Papers: this item is included in nep-ent, nep-ino, nep-knm and nep-tid
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Out-of-equilibrium profit and innovation (2011)
Working Paper: Out of Equilibrium Profit and Innovation (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:uto:labeco:200804

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