Advanced Manufacturing, Product Innovations, Productivity and Growth

This paper studies the role and complementarity of advanced manufacturing processes and product innovations for growth using new time-varying measures of process innovations, validated by patent examiners, from 1900 to 2020 across 60 countries. We uncover large and distinct effects of advanced manufacturing and product innovation for firm and aggregate growth. Higher quality process (product) innovation is associated with higher short-run (long-run) firm profits, sales, capital, and employment. There is a strong process-to-product technological spillover effect on firms’ profitability. Finally, product and process innovation contribute differently to growth and productivity convergence towards the U.S. for countries with different labor costs.