Abstract:
Most empirical studies on innovative activity are based on a single (or a very small number of) indicator(s), a procedure not appropriate to the complexity of the innovation process. In this study, using factor analysis we develop at the firm level a composite innovation measure which contains the information of a whole set of input-, output- and market-oriented indicators. This aggregate indicator computed separately for product and process innovations yields statistically satisfactory and economically plausible results. Canonical correlations show that this measure is superior to every single innovation indicator.