Innovations’ Success and Failure in the Business Cycle

Vicente Salas-Fumás and Javier Ortiz
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Vicente Salas-Fumás: Faculty of Economics and Business, Universidad de Zaragoza, 50009 Zaragoza, Spain
Javier Ortiz: Faculty of Economics and Business, Universidad de Zaragoza, 50009 Zaragoza, Spain

Sustainability, 2019, vol. 11, issue 15, 1-22

Abstract: This paper examines three channels of influence of the business cycle in the propensity of firms to introduce technological innovations: Aggregate demand (firms initiate more innovation projects in expansion than in recession; risk (the probability that initiated projects fail is higher in contraction than in expansion); and obstacles to innovate (more firms perceive the obstacles to innovate as high in recessions than in expansions and the high obstacles implies lower propensity to initiate innovation projects). With Spanish CIS data we find evidence that the three channels contributed to the fall in the proportion of firms that introduce technological innovations during the Great Recession, compared with the proportion of innovators in the years of expansion. The research methodology consists on estimating a multiprobit model with the probability that firms introduce technological innovations, the probability that firms abandon ongoing innovation projects, and the probability that firms perceive the obstacles to innovate as high.

Keywords: innovation output; abandons; business cycle; financial constraints; Spanish CIS panel data (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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