This empirical study aims to shed light on the link between innovation and economic performance at micro level. Based on a comprehensive survey among dairy and crop farms in the Netherlands we estimate a structural multi-stage model to deliver evidence on the effect of engagement and investment in innovation on the production of product, process and organizational or marketing innovations as well as on the effect of such innovations on farm level productivity. The results suggest various market and farm behaviour related factors to stimulate an increase in innovation engagement and production. Furthermore, the study reveals that indeed a greater innovation investment per unit (innovation input) leads to a higher probability of producing at least one successful product, process and/or organizational or marketing innovation (innovation output). The production of process and organizational or marketing related innovation leads to significant productivity gains. Various recommendations towards a more effective and efficient innovation policy are finally given.
- multi-stage model