Impact of Research and Innovation on Productivity of Firms: Empirical Evidence on German Smes

This paper is focusing on the impacts of R&D and innovation on productivity of firms at the firm level due to different behaviour towards innovation between SMEs and large firms. The aim is to understand why and to which extent firms decide to invest in innovation, what drives the innovation output and what are the impacts of the innovation output on productivity of firms. We make use of the data from specific innovation surveys on which we estimate an extended CDM model by size of firm applied in 4 successive steps. We find that for small firms unlike medium or large firms, innovation output has a negative impact on their productivity, which is counterbalanced by the public support.