EXPLAINING THE DECISIONS TO CARRY OUT PRODUCT AND PROCESS INNOVATIONS IN THE SPANISH MANUFACTURING INDUSTRY

Abstract We investigate the determinants of innovation activity making a distinction between product and process innovations. We analyse a pseudo production function of innovations where among the explanatory variables, special attention is paid to firm and market characteristics. The study is applied to a large sample of Spanish manufacturing firms during the period 1990–1993. There are important implications arising from the empirical results: 1) Product and process innovations are intimately related independently of the model used in the estimation. 2) The control by unobserved firm effects as the ability and experience of manager is so important as to affect the conclusions on the managerial decisions about which type of innovation develop. 3) Given the feedback effects amongst innovation decisions and other factors determining them, it is also very important to consider a version of the model that allows correlation among those unobserved effects and explanatory variables. 4) The probability to innovate is higher in capital intensive firms and in firms with export activities. 5) Market competition encourages the decision to innovate up to a threshold. vi) The past firm experience and the managerial quality play a significant role in the probability to innovate. vii) Product and process innovation decisions are complementary.

[1]  Jennifer F. Reinganum.  The timing of innovation: Research, development, and diffusion , 1989 .

[2]  Franco Malerba,et al.  The Semiconductor Business: The Economics of Rapid Growth and Decline , 1985 .

[3]  K. Arrow.  Economic Welfare and the Allocation of Resources for Invention , 1962 .

[4]  Luc Soete,et al.  Firm size and inventive activity: The evidence reconsidered , 1979 .

[5]  J. Neyman,et al.  Consistent Estimates Based on Partially Consistent Observations , 1948 .

[6]  D. Leonard-Barton,et al.  Managerial influence in the implementation of new technology , 1988 .

[7]  R. Blundell,et al.  Dynamic Count Data Models of Technological Innovation , 1994 .

[8]  Stephen Bond,et al.  Investment and Tobin's Q: Evidence from company panel data , 1992 .

[9]  J. Dutton,et al.  The Adoption of Radical and Incremental Innovations: An Empirical Analysis , 1986 .

[10]  Morton I. Kamien,et al.  Market Structure, Elasticity of Demand and Incentive to Invent , 1970, The Journal of Law and Economics.

[11]  Erling B. Andersen,et al.  Conditional Inference and Models for Measuring , 1974 .

[12]  Bronwyn H Hall,et al.  The Impact of Corporate Restructuring on Industrial Research and Development , 1989, Brookings Papers on Economic Activity. Microeconomics.

[13]  Z. Griliches,et al.  Patents and R and D: Is There a Lag? , 1986 .

[14]  Zvi Griliches,et al.  Productivity and R and D at the Firm Level , 1981 .

[15]  M. Lessnoff.  Capitalism, Socialism and Democracy , 1979 .

[16]  Albert N. Link,et al.  An Analysis of the Composition of R&D. Spending. , 1982 .

[17]  Keith Pavitt,et al.  The Size Distribution of Innovating Firms in the UK: 1945-1983 , 1987 .

[18]  Wesley M. Cohen,et al.  Empirical studies of innovation and market structure , 1989 .

[19]  Wesley M. Cohen,et al.  R&D Appropriability, Opportunity, and Market Structure: New Evidence on Some Schumpeterian Hypotheses , 1985 .

[20]  Z. Ács,et al.  Innovation, Market Structure, and Firm Size , 1987 .

[21]  F. Scherer.  Concentration, R&D, and Productivity Change , 1983 .

[22]  Z. Griliches,et al.  Who Does R&D and Who Patents? , 1982 .

[23]  G. Symeonidis,et al.  Innovation, firm size and market structure , 1996 .

[24]  A. Kleinknecht,et al.  Innovative output, and a firm's propensity to patent.: an exploration of CIS micro data , 1999 .

[25]  M. Moch,et al.  Size, Centralization and Organizational Adoption of Innovations , 1977 .

[26]  Robert A. Moffitt,et al.  A COMPUTATIONALLY EFFICIENT QUADRATURE PROCEDURE FOR THE ONE-FACTOR MULTINOMIAL PROBIT MODEL , 1982 .

[27]  Bruno Crépon,et al.  Research and development, competition and innovation pseudo-maximum likelihood and simulated maximum likelihood methods applied to count data models with heterogeneity☆ , 1997 .

[28]  M. Albert.  Análisis microeconómico de los determinantes de la innovación: aplicación a las empresas industriales españolas , 1997 .

[29]  Concentration and the returns to R&D , 1984 .

[30]  Albert N. Link,et al.  Investments in Technology: Corporate Strategies & Public Policy Alternatives , 1983 .

[31]  R. Daft.  A Dual-Core Model of Organizational Innovation , 1978 .

[32]  Jacques Mairesse,et al.  Productivity and R&D at the Firm Level in French Manufacturing , 1983 .

[33]  Kornelius Kraft,et al.  Are product and Process Innovations Independent of Each Other , 1990 .

[34]  Glenn C. Loury,et al.  Market Structure and Innovation , 1979 .

[35]  John Lunn,et al.  An Empirical Analysis of Process and Product Patenting: A Simultaneous Equation Framework , 1986 .

[36]  Gary Chamberlain,et al.  Analysis of Covariance with Qualitative Data , 1979 .

[37]  Jacob Schmookler,et al.  Invention and Economic Growth , 1967 .

[38]  T. M. Amabile.  The social psychology of creativity , 1984 .

[39]  A. Spence.  Monopoly, Quality, and Regulation , 1975 .

[40]  G. Symeonidis,et al.  Innovation, Firm Size and Market Structure: Schumpeterian Hypotheses and Some New Themes , 1996 .

[41]  R. Zmud.  An Examination of Push-Pull Theory Applied to Process Innovation in Knowledge Work , 1984 .

[42]  J. Ettlie,et al.  Organization Strategy and Structural Differences for Radical Versus Incremental Innovation , 1984 .

[43]  Zvi Griliches,et al.  Patents and R&D: is There a Lag? , 1984 .

[44]  Richard C. Levin,et al.  Tests of a Schumpeterian Model of R&D and Market Structure , 1984 .

[45]  D DewarRobert,et al.  The Adoption of Radical and Incremental Innovations , 1986 .

[46]  A. Arundel,et al.  What percentage of innovations are patented? empirical estimates for European firms , 1998 .

[47]  Rachel Griffith,et al.  Knowledge stocks, persistent innovation and market dominance: evidence from a panel of British manufacturing firms , 1993 .