Innovation in SMEs exhibits some peculiar features that most traditional indicators of innovation activity do not … capture. Therefore, in this paper, we develop a structural model of innovation which incorporates information on innovation … the likelihood of having both process and product innovation. Both these kinds of innovation have a positive impact on …

), allows for causal interpretation of the relationship between innovation output and labor productivity. We find that knowledge … intensive services benefit from innovation activities in the sense that these activities causally increase their labor …

manufacturing. Results from our structural models indicate that KIS firms benefit from innovation activities through increased labor … productivity with highly skilled employees being similarly important compared to R&D for creating innovation output in microfirms … firms having a higher probability of initiating innovation activities and of successfully turning knowledge into innovation …

), allows for causal interpretation of the relationship between innovation output and labor productivity. We find that knowledge … intensive services benefit from innovation activities in the sense that these activities causally increase their labor …