: Echelon Institute of Technology Faridabad, YMCA University of Science &
Technology Faridabad, Haryana, India
Business innovation is regarded as an important driver of productivity
growth. In this paper, it is investigated that R&D and ICT investment at the firm level in
an effort to assess their relative importance for innovation. Explicitly, it is used a refined
version of the CDM model that includes ICT and R&D investment as the two main
inputs into innovation and productivity, and test it on a firm-level panel data set based
on the recent four waves of the innovation survey for India. Two measures of innovative
output are tested, i.e., four types of innovation (product, process, organizational and
marketing innovation) and number of patent applications. It is found that R&D and
ICT are both strongly associated with innovation and productivity, with R&D being
more important for innovation, and ICT being more important for productivity. These
results suggest that ICT is an important driver of productivity growth that could explain
the “Indian productivity puzzle”, i.e., the feature that India having a relative low level
of R&D intensity. The results also indicate considerable differences between firms in
Manufacturing and Services with respect to innovation and productivity effects of ICT,
R&D and human capital.
:Innovation; ICT; R&D; Productivity; CDM model; Manufacturing and
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