Is Demand-Pulled Innovation Equally Important in Different Groups of Firms?

Mariacristina Piva and Marco Vivarelli ()

No 1982, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Previous empirical literature - mainly cross-sectional - has tested the demand-pull hypothesis and found that overall, evidence does not conflict with the idea that innovation may be driven by output. Using a balanced panel of 216 Italian manufacturing firms over the 1995-2000 period, and checking for fixed effects, time, sectoral and size dummies and for the path-dependent nature of R&D, we also find a (barely significant) role of sales in inducing R&D expenditures. However, at the micro level, the demand-pull effect plays a varying role for the different sub-samples of firms. In particular, exporting firms, those which are liquidity-constrained, those not receiving public subsidies and those not heading a business group, seem to be particularly sensitive to sales in deciding their R&D expenditures. These microeconometric results have been obtained using a Least Squares Dummy Variable Corrected (LSDVC) estimator, a recently-proposed panel data technique particularly suitable for small samples.

Keywords: LSDVC estimator; R&D expenditures; demand-pull; innovative firms (search for similar items in EconPapers)
JEL-codes: O31 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2006-02
New Economics Papers: this item is included in nep-ino, nep-mic and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published - published in: Cambridge Journal of Economics, 2007, 31(5), 691-710

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