Abstract

This paper follows a knowledge production function approach to assess the contribution of R&D spending, the purchase of new machinery, and producersusers interaction to the productivity performance of German and Italian firms in manufacturing. For this purpose it employs microaggregated data from the First Community Innovation Survey. The regression analysis confirms the results of previous studies that technological change embodied in new machinery and capital equipment is a major factor affecting the productivity level of manufacturing firms in most industries (in particular in Italy), although the role of R&D activities is crucial for most firms in both countries, and that this is also the case in traditional consumer goods industries such as textiles, clothing, and leather & leather products. Conversely, only for Germany does producersusers interaction prove significantly to influence the productivity level of firms in certain industries.