ICT uses, innovation and SMEs productivity: Modeling direct and indirect effects in small local firms

Abstract

The working paper analyses new co-innovative sources of labour productivity (ICTs, human capital and training, and new forms of work organisation) in small firms producing for local markets. Using 2009 survey data for a representative sample of 464 firms based in Girona (a province in the north-east of Spain) and using Ordinary Least Square (OLS) and Structural Equation Modelling (SEM) econometric estimation techniques, two main findings have emerged from the study. First, that mean wage is the main determinant of labour productivity. And second, unlike the evidence available for larger firms, in small local firms co-innovation has an indirect effect on labour productivity. Direct causal relationships between co-innovation and productivity have only been identified in the innovative small local firms. A causal relationship between co-innovation and all small local firms’ productivity has been established indirectly, by the effect that the capacity to export to markets outside the European Union. Also, some new directions in public policy to improve the productivity in small local firms have been identified.