Innovation, R&D Investment and Productivity in Colombia

Abstract: The main objective of this paper is to establish a formal relationship between innovation and performance using Colombian firm-level data. We find that, as predicted by the literature, the production of goods and services new to the firm and to the domestic market enhances firms´ productivity and sales. In the same way, innovation in management and marketing boosts firms´ productivity and sales. However, contrary to theoretical predictions, the production of goods and services new to the international market has a strong negative impact on TFP, although it largely increases sales when firms invest in R&D. We also study the factors behind the firms´ decision to invest in innovation, the intensity of such investment and the returns to investment in innovation.