Human capital, innovation and productivity in Colombian enterprises: a structural approach using instrumental variables

In this paper we explore the R&D?innovation?productivity linkage for the Colombian manufacturing industry, paying special attention to the role of human capital. Using data from two firm-level surveys, the Survey of Development and Technological Innovation (EDIT) and the Annual Manufacturing Survey (EAM), we extend the model of Cr?pon, Duguet, and Mairesse [1998. ?Research, Innovation and Productivity: An Econometric Analysis at the Firm Level.? Economics of Innovation and New Technology 7 (2): 115?158] (hereafter CDM) by including human capital at the investment decision stage. We implement an instrumental variable methodology to correct the potential endogeneity that may arise with the inclusion of human capital. Our results suggest that human capital has a causal effect on research and development (R&D) investment decisions, the innovation behavior of the firm, and increases the labor productivity of the firm. The conclusions highlight the relevance of human capital in the surrounding literature which stands in contrast to prior work that has not included this variable.