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Innovative activities and investment decision: evidence from European firms

Oliviero Carboni and Giuseppe Medda ()

The Journal of Technology Transfer, 2021, vol. 46, issue 1, No 7, 172-196

Abstract: Abstract This paper investigates the role of innovative activity and other micro determinants, on firms’ investment behaviour. The empirical analysis is based on a large representative and cross-country comparative sample of manufacturing firms across seven European countries during the global financial crisis 2007–2009. It is argued that innovative activities, measured either by an input variable (R&D) or by an output variable (innovative products sales), may boost additional investment in equipment and machinery. Given the significant share of firms which did not carry out any investment, a tobit procedure is adopted. Successively, in order to account for the potential simultaneity between investment decision and innovation activity variables, a seemingly unrelated regression equation methodology is applied. The results reveal that both R&D and innovative sales positively affect investment decisions, with the former having a stronger impact on investments, compared to the latter. The analysis also suggests that, after checking for a firm’s characteristics, firms in Germany and Spain are more likely to invest than those in France, Italy, and the UK.

Keywords: R&D; Tangible investment; Firm behavior; SUR model (search for similar items in EconPapers)
JEL-codes: C31 C34 D22 O32 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s10961-019-09765-6

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