Innovation Height and Firm Performance: An Empirical Analysis from the Community Innovation Survey

This study evaluates the economic impact of product innovation by using firm-level data from the Community Innovation Survey conducted in Japan. It accounts for possible technological spillover from innovation activities and examines the extent to which new-tomarket product innovations contribute to firm performance. Econometric analysis using a simultaneous equation model reveals that new-to-market product innovation is likely to increase a firm’s sales without cannibalizing those of existing products and generate more technological spillover to other firms. Moreover, such innovation is more likely to emerge from firms collaborating with academic institutions. The paper concludes by discussing policy implications of these findings as well as points to the importance of cross-country comparison between Korea and Japan.