The Impact of innovation activities on firm performance using a multi-stage model: evidence from the Community Innovation Survey 4

Iraj Hashi () and Nebojsa Stojcic

No 410, CASE Network Studies and Analyses from CASE-Center for Social and Economic Research

Abstract: The impact of innovation on firm performance has been a matter of significant interest to economists and policy makers for decades. Although innovation is generally regarded as a means of improving the competitiveness of firms and their performance on domestic and foreign markets, this relationship has not been supported unambiguously by empirical work. Innovative activities of firms influence their performance not necessarily directly but through the production of useful innovations and increased productivity. Therefore, in recent years, the relationship between innovation and firm performance has been modelled by a multistage approach. However, the findings from existing studies differ in many respects which suggests that there is the need for further research. In this paper we employ firm level data from the fourth Community Innovation Survey (CIS4), covering some 90,000 firms in 16 West and East European countries in order to assess the drivers of the innovation process in two different institutional settings, a number of mature market economies of Western Europe and a number of advanced transition economies from Central and Eastern Europe. A four-equation model, originating in the work of Crepon et al., (1998), has been used to link the innovation decision of firms to their performance through the impact of innovation input on innovation output and the innovation output on productivity and better performance. Our findings confirm the positive relationship between innovation activities and productivity at the firm level and provide further evidence on the relationship between size and innovation activities.

Keywords: innovation; firm performance; multi-stage model; Community Innovation Survey 4 (search for similar items in EconPapers)
JEL-codes: L25 O31 (search for similar items in EconPapers)
Pages: 40 Pages
Date: 2010
New Economics Papers: this item is included in nep-cse, nep-eff, nep-ino, nep-sbm, nep-tid and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Journal Article: The impact of innovation activities on firm performance using a multi-stage model: Evidence from the Community Innovation Survey 4 (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:sec:cnstan:0410

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