Experience, Innovation and Productivity - Empirical Evidence from Italy's Slowdown

Phone and i-Pad devices. So at times managers grow old, but their ability to innovate does not
necessarily fade away.

Even among scientists and artists, while there is widespread agreement that great innovations often
come from the young and the un-experienced yet brilliant minds. Chicago economist David
Galenson (2003, 2005, 2007) has documented how the life-cycle of artists may be distinctively of
two types, of a conceptual and an experiential type, so that the young genius of Van Gogh and
Picasso, of Melville and Welles can be matched by the experienced ability of Michelangelo and
Rembrandt, Paul Cezanne and Alfred Hitchcock. The relation between age and fundamental
innovations in arts and science seems not to be linear as well.

Apart from scientists, artists and managers, this set of issues also has deep implications for workers.
The productivity of individual workers depends on a host of characteristics, such as education and
skills, experience, motivation, intellectual and physical abilities. Some of these worker
characteristics - notably the productive value of skills - may deteriorate with age. Verhaegen and
Salthouse (1997) present a meta-analysis of 91 studies on how mental abilities develop over the
individual life span. Based on these studies, they conclude that the cognitive abilities (reasoning,
speed and episodic memory) decline significantly just before 50 years of age and more thereafter.
Maximum levels are instead achieved in the 20s and the 30s, independently of country and sex.

Altogether, whether the good or the bad effects of experience actually prevail in practice is largely
an empirical matter that can be usefully investigated with company data. In this paper we analyze
the role of managerial and workers’ experience in spurring (or depressing) firm-level innovation
and productivity gains, exploiting firm-level data from the Italian economy in the early 2000s.

Italy in the early 2000s provides a fertile ground for studying the implications of experience for
innovation and productivity. As shown in Table 1, since the second half of the 1990s a sharp
productivity slowdown came about in the Italian economy, in spite of the fact that brand new
technologies and managerial techniques had become available out there “on the shelf” thanks to the
ICT revolution. Italy’s productivity slowdown is not the consequence of unfortunate business cycle

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