Determinants of Innovation and Productivity in the Service Sector in Mexico

Abstract

Based on survey data about firms in Mexico this paper investigates the determinants of innovation, and the linkages between innovation and productivity in the services sector. We applied a three-stage Crépon-Duguet-Mairesse (CDM) econometric model; the use of manufacturing firms as benchmark helped to better appreciate our findings. The paper identified that a series of structural, performance, and behavioral factors increase a firm's propensity to invest in innovation, but some differences arise between services and manufacturing firms. Intensive investment in innovation leads to superior innovation performance, while innovation output has a positive impact on labor productivity.JEL classification: L8, O12, O14, O31, O33, O38, O40

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