Aggregate productivity growth in the economy is largely a reflection of the productivity growth of individual firms, and that stems, in turn, from all the various forms of innovation at firm level – new products, new processes, new marketing techniques and new organisational methods. Most of these innovations do not advance the global technological frontier, simply representing the adoption of existing technologies in order to help firms to boost their productivity. Chapter 2 looks at the link between productivity and innovation in greater detail.

As the analysis in this chapter shows, innovation rates vary considerably, both across industries and across countries. Some countries – particularly in the CEB region – have succeeded in increasing the innovation intensity of their exports, while the innovation intensity of other countries’ exports has stagnated at low levels or declined. There are many factors that may account for these differences, and these are discussed in Chapter 3 of this report. Chapter 4 then examines the specific role played by access to finance.

Countries also differ in terms of the strategies that firms use in order to obtain the knowledge that underpins innovation. In some cases firms tend to focus on in-house R&D, while in other cases firms tend to purchase technology or know-how. Chapter 5 examines various policies that can be pursued in order to support innovation, taking these differences into account.