Productivity, Product Differentiation and Profitability: A Comparison between the Chemical and the Textile Industries in Greece.

Abstract

The purpose of this study is to investigate the relationship between the profitability of the firm and its Research and Development expenditures. We separate Research and Development expenditures in two main categories, Research and Development that focuses on the product differentiation and Research and Development, which concerns improvements in production process. The latter leads to a more efficient production, which can be measured by labour productivity. We estimate our model using cross section analysis and test the impact of the two aforementioned variables upon firm’s profitability. Our model was applied to Greek Chemical industry and to Greek Textile industry, for a data set of 124 enterprises of the chemical sector 139 enterprises in the textiles sector in the year 2001. Our findings support the positive influence of productivity on profitability is present in both manufacturing sectors, although not at an equal weight.