Innovation and demand in industry dynamics

Francesco Bogliacino and Mario Pianta

No 1101, Working Papers from University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini

Abstract: The links between three interconnected elements of the Schumpeterian sources of economic change are explored, conceptually and empirically, in this paper: the commitment of industries to invest profits in cumulative R&D efforts; the ability of industries? R&D to lead to successful innovations; the impact of new products and processes on high entrepreneurial profits. We consider the nature and variety of innovative efforts ? distinguishing in particular between strategies of technological and cost competiveness ? and we introduce the role of demand in pulling technological change and supporting profits. We develop a simultaneous three-equation model 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 and highlights the interconnections between the different factors contributing to growth.

Keywords: R&D; Innovation; Profits; Demand; System Three Stages Least Squares. (search for similar items in EconPapers)
JEL-codes: L6 L8 O31 O33 O52 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2011, Revised 2011
New Economics Papers: this item is included in nep-cse, nep-ent, nep-ino, nep-sbm and nep-tid
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http://www.econ.uniurb.it/RePEc/urb/wpaper/WP_11_01.pdf First version, 2011 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:urb:wpaper:11_01

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