Innovation and productivity: An analysis of the chemical, textiles and machine tool industries in the U.S

The relationship between innovation and productivity growth in the chemical, textile and machine tool industries is explored here. Information about innovations has been obtained from published sources. Although the linkage between innovation and productivity can be a complex one, it is observed that the slowdown of the productivity growth in the chemical industry coincided with a significant slowdown in innovation. An opposite trend is observed in the textile industry. Although the machine tool industry showed an increase in innovation, the productivity growth slowed down consistently during 1967–1984. Cyclical fluctuation in the demand for machine tools might have created a difficult problem. Moreover, the small companies which were interested in producing machines for special purposes used labor intensive processes which did little to improve productivity and their excess wage could not be reflected in the price because of intense competition. The impact of environmental and other governmental regulations on innovation in the chemical and textile industry is also discussed.