INOV · Understanding the causal impact of firm innovation on efficiency, product prices and markups, the underlying mechanisms, of firm innovation and aggregate implications.

The Inov project aims to estimate the causal impact of firm innovation on productivity (revenue and technical efficiency), output prices, and markups using state-of-the-art microeconomic techniques. The project also aims to understand the economic mechanisms behind this relation and discuss, to what extent they could benefit firms and consumers. At last, we test if there are aggregate implications arising from innovation outcomes related to its role in changing the allocation of resources in the economy. Important contributions and novelty of this project are to show the causal impact of firm innovation while taking into account the riskiness of R&D, identify the impact on output prices, product market concentration, markups, and firm efficiency of successful innovation. In addition, it explains these findings by exploring a set of economic mechanisms such as: i) the role of product reallocation, ii) the persistency of innovation, iii) complementary hypothesis across innovation types, and iv) the role of international trade (exports and imports). At last, it shows that innovation might have implications for the aggregate economy in terms of generating misallocation.