Innovation and productivity in tourism small and medium enterprises: A longitudinal study

This paper examines the factors influencing innovation and the relationship between innovation and productivity among Australian tourism small and medium enterprises (SMEs). Unlike most past studies relying on crosssectional data, this study employs longitudinal innovation data of 400 tourism SMEs over five years. A twostage random-effects probit model is used to account for unobserved firm heterogeneity. The results show that innovation inputs, firm characteristics, and external environment significantly affect innovation in general with competition and demand uncertainty being the distinct drivers of marketing innovation. The study reveals a significant and positive effect of technological and marketing innovation on tourism SMEs' productivity. Findings inform policy discussions to improve the current low levels of productivity in the tourism industry.