Fact of the Week: Innovative Filipino Manufacturing Firms Earn 20 Percent More Profit and Experience 24 Percent Greater Labor Productivity Than Their Less Innovative Domestic Competitors

March 30, 2017

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Innovation increases labor productivity and economic growth. This economic fact is borne out across all economies, regardless of development status. In fact, developing economies have the most to gain from embracing innovation, given that they have more room to grow relative to already developed nations.

Such is the case in the Philippines where manufacturing makes up a fifth of the economy. Researchers at the Philippine Institute for Development Studies analyzed data from 211 manufacturing firms across 20 sectors. They show that about 50 percent of Filipino manufacturing firms engage in some form of product innovation, and as a result experience 24 percent greater labor productivity and earn 20 percent more profits than their less innovative domestic competitors.

This “innovation premium” demonstrates the necessity to promote innovation policies, such as cheaper and more ready access to the latest information and communication technologies, as a viable mechanism for economic growth.

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Innovative Filipino Manufacturing Firms Earn 20 Percent More Profit and Experience 24 Percent Greater Labor Productivity Than Their Less Innovative Domestic Competitors