Engines of growth. Innovation and productivity in industry groups

The diversity of technological activities that contribute to growth in labour productivity is examined in this article for manufacturing and services industries in eight major EU countries. We test the relevance of two " engines of growth" , i.e., the strategies of technological competitiveness (based on innovation in products and markets) and cost competitiveness (relying on innovation in processes and machinery) and their impact on economic performance. We propose models for the determinants of changes in labour productivity and we carry out empirical tests for both the whole economy and for the four Revised Pavitt classes that group manufacturing and services industries with distinct patterns of innovation. Tests are carried out by pooling industries, countries and three time periods, using innovation survey data from CIS 2, 3 and 4, linked to economic variables. The results confirm the specificity of the two " engines of growth"; economic performances in European industries appear as the result of different innovation models, with strong specificities of the four Revised Pavitt classes. © 2010 Elsevier B.V.