Review of Industrial Organization 19: 507–510, 2001.
Productivity, Innovation and Economic Performance, Ray Barrell, Geoff Mason,
and May O’Mahoney, editors, Cambridge: Cambridge University Press, 2000, 289
This book contains a set of articles dealing with various aspects of innovation, pro-
ductivity growth and economic performance. While the data analysis and examples
focus primarily on the U.K, the concepts and results are broad and easily general-
ized to other settings. The readings cover a broad range of topics, making this book
useful to a wide variety of researchers. Each chapter provides an exhaustive and up
to date reference list; the bibliography alone is worth the purchase price. The book
is recommended reading for anyone with an interest in productivity growth and
innovation. Readers new to the literature will ﬁnd that each chapter summarizes
pertinent issues, while researchers with an ongoing agenda will ﬁnd depth in the
more technical material. The remainder of this review provides a brief summary of
the individual contributions. Articles are referred to by chapter number rather than
by title or author in order to conserve space.
Chapter one, an overview of contemporary issues related to innovation and
productivity, provides the reader with a road map for topics found in the text.
Among the issues presented in chapter one are growth rates across countries and
their relation to per capita GDP, measurement of productivity and innovation with
particular emphasis on the difﬁculty of measuring these concepts in the new eco-
nomy and the importance of spillovers and diffusion. Productivity growth is related
to the work of Solow and Schumpeter’s process of creative destruction. A continu-
ing theme relates labor-intensive quality improvements in service industries to the
false perception of declining productivity. Coverage of global issues includes an
assessment of where countries perform their research and development activities,
the role of openness at industry and country levels in determining innovation and
productivity growth, and technology convergence across countries. The authors
observe that efﬁcient markets would allow ﬁrms to appropriate the future value
of current R&D activities, but that spillovers in research and development may
limit the ability of incentive structures to capture the true social value of innovative
efforts. Methodological issues raised in chapter one relate to the Solow residual as
a measure of technical progress and the use of hedonic modeling.