On Profit Differentials Between Persistent and Occasional Innovators: New Evidences from a Random-Coefficient Treatment Model

Giovanni Cerulli and Bianca Potì ()
Additional contact information
Bianca Potì: National Research Council

A chapter in Long Term Economic Development, 2013, pp 363-393 from Springer

Abstract: Abstract The paper studies the medium-term effect of being a persistent (occasional) innovator on firm economic return within a “counterfactual” setting using a random-coefficient model. This approach allows us to assess not only the point effect of a persistent/occasional innovation strategy on profitability, as in standard regression settings, but the “entire distribution” of it. We exploit a 9 years (1998–2006) longitudinal dataset of Italian manufacturing firms obtained by a merging of the last three waves of the Capitalia/Unicredit survey (eighth, ninth and tenth survey). Results show a strong better economic performance of the group of firms that continuously implement their innovating capacity and output. Also occasional innovation produces good operating profit margin (OPM) differentials, although we estimate a difference with the persistent behavior of about three (percentage) points lower. Differences between occasional and persistent innovators are also enlightened at a dynamic level: we found that persistent innovation allows for a dynamic advantage against occasional “first-time-only” innovative strategy. Moreover, the analysis of the idiosyncratic distribution of the effect, based on the random-coefficient model, allows us to inspect what factors lead to be persistent innovators and we identify the “best performers” among them. These champions are characterized by a large stock of accumulated knowledge, a large size and operate in more concentrated markets. This result confirms what we have found in the literature on innovation persistence: dynamic capability building can be found mainly when a mechanism of increasing returns to scale is operating and this is mainly present in few leading companies.

Keywords: Propensity Score; Dynamic Capability; Innovation Strategy; Average Treatment Effect; Good Performer (search for similar items in EconPapers)
Date: 2013
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:eccchp:978-3-642-35125-9_16

Ordering information: This item can be ordered from
http://www.springer.com/9783642351259

DOI: 10.1007/978-3-642-35125-9_16

Access Statistics for this chapter

More chapters in Economic Complexity and Evolution from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().