Technological spillovers and productivity in Italian manufacturing firms

We study whether a firm’s total factor productivity dynamics is positively influenced by its own R&D activity and by the technological spillovers generated at the intra‐ and inter‐sectorial level. Our approach corrects simultaneously for the endogeneity and the selectivity biases introduced by the use of a firm’s own R&D as a regressor. The evidence suggests that a firm’s involvement in R&D activities accounts for significant productivity gains. Firms also benefit from spillovers originating from their own industries, as well as from innovative upstream sectors.