Appropriability mechanisms, innovation and productivity: Evidence from the UK

We use an extended version of the well-established Crepon, Duguet and Mairesse model 1998 to model the relationship between appropriability mechanisms, innovation and firm-level productivity. We enrich this model in several ways. First, we consider different types of innovation spending and study the differences in estimates when innovation spending rather than RD spending is used to predict innovation in the CDM model. Second, we assume that a firm simultaneously innovates and chooses among different appropriability methods formal or informal to protect the innovation. Finally, in the third stage, we estimate the impact of the innovation output conditional on the choice of appropriability mechanisms on firmsf productivity. We find that firms that innovate and rate formal methods for the protection of Intellectual Property IP highly are more productive than other firms, but that the same does not hold in the case of informal methods for the protection of a firmfs IP, except possibly for large firms as opposed to SMEs. We also find that this result is strongest for firms in the services, trade, and utility sectors, and negative in the manufacturing sector.