Profits, R&D and Innovation: a Model and a Test

Francesco Bogliacino and Mario Pianta

No 2010-05, JRC Working Papers on Corporate R&D and Innovation from Joint Research Centre

Abstract: In this article we investigate both conceptually and empirically the relationship between three interconnected elements of the Schumpeterian engine of progress: the ability of industries R&D efforts to turn out successful innovations; the ability of innovations to lead to high entrepreneurial profits; the commitment of industries to invest profits in further technological efforts. We build a simultaneous three-equation model with appropriate lags and we test it at industry level for 38 manufacturing and service sectors on eight European countries over two time periods from 1994 to 2006. The results show that the model effectively accounts for the dynamics of European industries. Our main results are that demand and innovation are the key determinants for firm profitability; second that both technology adoption and R&D concur to improve innovative performance; third, that R&D is path dependent and is negatively related to the distance from the frontier. Finally, manufacturing and services show similar behaviour.

Keywords: Profits; R&D; Innovation; System Two Stages Least Squares (search for similar items in EconPapers)
JEL-codes: L6 L8 O31 O33 O52 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2010-05
New Economics Papers: this item is included in nep-cse, nep-ent, nep-ino, nep-ipr, nep-pr~, nep-sbm and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://publications.jrc.ec.europa.eu/repository/handle/JRC58871 (application/pdf)

Related works:
Journal Article: Profits, R&D, and innovation--a model and a test (2013)
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:ipt:wpaper:201005

Access Statistics for this paper

More papers in JRC Working Papers on Corporate R&D and Innovation from Joint Research Centre Contact information at EDIRC.
Bibliographic data for series maintained by Publication Officer ().