IS THERE A COMPLEMENTARY RELATIONSHIP BETWEEN PRODUCT AND PROCESS INNOVATION ON PRODUCTIVITY IN TAIWANESE MANUFACTURING FIRMS

Abstract

As a newly-industrialized country, Taiwan has gone through a vast industrial transformation. To reflect the impacts of innovation on firms' performance, we adopt a modified CDM (Crepon et al., 1998) model and focus on the innovation activities of Taiwanese manufacturing firms, especially on the comparison between OEM and non-OEM. Two data sources are uniquely compiled; one is the TTIS-II, and the other is the ICSC. Our findings suggest that considering the whole sample, only process innovation will improve both TFP growth and labor productivity growth. However, there exists a complementary relationship between product and process innovation on productivity among OEM.