The aim of this article is to analyze the factors that drive the propensity to innovation and productivity in the service and manufacturing sectors in Colombia from 2013 to 2017. In order to accomplish this goal, we used an innovation function to represent the characteristics that affect the innovative capacity of the company, together with vectors for the characteristics of the company and for inputs, that allow calculating the effect of these factors on the production. In addition, we calculated the total factor productivity (TFP) with a Cobb-Douglas function, and examined the variation in the productivity for both sectors. The main results make clear that the size of the companies, the foreign direct investment (FDI), and the cooperation with other institutions have a significant impact on the propensity to innovate; likewise, the percentage of human capital and exports has a widespread positive effect, which is greater in the service sector. In the calculation of productivity, the stock of physical capital, workers, and investment in research and development (R&D) have a positive participation in the business growth of both sectors. Variations in productivity during the periods that were studied show greater increases and more homogeneous levels in the manufacturing sector than in the services sector.
