Industrial Evolution and Innovation in Japan

Abstract

This paper studies the impact on productivity by innovation using plant and product-level panel data in Japan. The panel data could make us distinguish innovation by “New Varieties”, “Own Innovation”, “Constant Quality”, “Decreasing Quality”, and “Obsolescence”. This paper shows that relatively old firms produce many innovations, while the “New Varieties” type is brought by small size plant and the “Own Innovation” type is brought by large size plant. In addition, the plant-level fixed effect panel data estimation shows that “New Varieties”, “Own Innovation” and “Constant Quality” have positive impact on productivity. On the other hand, our estimation provides that “Decreasing Quality” and “Obsolescence” have negative impact on productivity.