Innovation, Adoption, Ownership And Productivity: Evidence From Ukraine

How do new and foreign firms achieve superior productivity? Do they conduct more and better R&D? Or do they distinguish themselves through computerization and organizational capital? We investigate the determinants of and returns on several types of investment, using a panel of over 40,000 Ukrainian industrial firms in 2000–2007. Foreign firms engage in more non-technological investment and IT and in less R&D than domestic private firms. Similarly, new firms invest more in non-technological capital and IT and less in R&D than initially state-owned firms. Productivity gains from R&D and non-technology investment are insignificantly different across ownership types, whereas foreign firms achieve much higher returns on IT investment than other firms. These results suggest that foreign firms outperform others through organizational capital that is better able to exploit IT investment. New firm productivity growth is a result of higher investment volume rather than investment efficiency.