Innovation and Productivity: Extending the Core Model (Innovation in Firms: A Microeconomic Perspective)

The OECD core model (see Chapter 3) achieved quite remarkable results even if constrained by international benchmarking requirements (use of a "simpler" model in order to include a number of OECD countries). However, important variables were omitted or simplified to enable international comparisons. Obvious examples are: the use of a sub-optimal productivity equation (value added or total factor productivity variables would have been better candidates for productivity measures than total turnover); omission of important production factors such as measures of human and physical capital; and the use of binary variables when quantitative ones were available for some countries (e.g. exports).
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