The contribution of innovations in total factor productivity of organic olive enterprises

This paper measures the contribution of innovations in total factor productivity(TFP) of organic olive farmers. By constructing an innovation variable instead of the use of a time trend, technical change is replaced by technical difference and TFP growth becomes TFP difference. Primary cross section data on organic olive enterprises from a Greek region is used in the application of the restricted frontier profit function. Farmers are classified into groups according to their innovative ‘profile’. TFP difference among consecutive innovation groups is decomposed into technical difference and adjustment in innovativeness effects. Furthermore, efficiency differences among innovation groups are estimated. Results indicate that more innovative farmers perform better than less innovative ones regarding TFP and efficiency scores. Adoption of innovations has a positive contribution in the reduction of inefficiency and profit-loss. The rate of technical difference is always positive in the formulation of TFP difference whereas the adjustment in innovativeness effects varies among the innovation groups. Finally, high-tech capital is more or less under-utilized, regardless of the innovation group.