Persistence of innovation: stylised facts and panel data evidence

This paper investigates whether firms innovate persistently or discontinuously over time using an innovation panel data set on German manufacturing and service firms for the period 1994–2002. It turns out that innovation behaviour is permanent at the firm–level to a very large extent. Using a dynamic random effects discrete choice model and a new estimator recently proposed by Wooldrigde (2005), I further shed some light on the driving forces for this phenomenon. The econometric results show that past innovation experience is an important determinant for manufacturing as well as for service sector firms, and hence confirm the hypothesis of true state dependence. In addition, the results highlight the important role of knowledge provided by skilled employees and unobserved individual heterogeneity in explaining the persistence of innovation.

[1]  J. Howells.  The location of research and development: Some observations and evidence from Britain , 1984 .

[2]  Raymond Wladimir,et al.  Persistence of innovation in Dutch manufacturing : is it spurious? , 2006 .

[3]  S. Winter,et al.  An evolutionary theory of economic change , 1983 .

[4]  P. Romer.  Endogenous Technological Change , 1989, Journal of Political Economy.

[5]  M. C. Jensen,et al.  Harvard Business School; SSRN; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); Harvard University - Accounting & Control Unit , 1976 .

[6]  Ulrich Kaiser,et al.  True versus spurious state dependence in firm performance , 2008 .

[7]  F. Malerba,et al.  Technological Regimes and Firm Bebavior , 1993 .

[8]  Juan Llopis,et al.  A DYNAMIC APPROACH TO THE DECISION TO INVEST IN R & D : THE ROLE OF SUNK COSTS , 2004 .

[9]  M. Santoro.  Success breeds success , 2000 .

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

[11]  Jesus M. Carro.  Estimating Dynamic Panel Data Discrete Choice Models with Fixed Effects , 2003 .

[12]  Z. Griliches.  Patent Statistics as Economic Indicators: a Survey , 1990 .

[13]  Marcus Hutter,et al.  Model Growth , 2002 .

[14]  T. Schmidt,et al.  Innovationsverhalten der deutschen Wirtschaft: Hintergrundbericht zur Innovationserhebung 2001 , 2002 .

[15]  Michael Lechner,et al.  On the dynamics of process innovative activity: an empirical investigation using panel data , 1993 .

[16]  R. Nelson.  The Simple Economics of Basic Scientific Research , 1959, Journal of Political Economy.

[17]  Franco Malerba,et al.  Technological entry, exit and survival: an empirical analysis of patent data , 1999 .

[18]  J. Heckman.  Heterogeneity and State Dependence , 1981 .

[19]  S. Winter,et al.  An Evolutionary Theory of Economic Change.by Richard R. Nelson; Sidney G. Winter , 1987 .

[20]  Bo E. Honoré,et al.  Semiparametric Binary Choice Panel Data Models without Strictly Exogeneous Regressors , 2000 .

[21]  Arthur Lewbel,et al.  Simple Endogenous Binary Choice and Selection Panel Model Estimators , 2006 .

[22]  Philippe Aghion,et al.  VIRTUES OF BAD TIMES Interaction Between Productivity Growth and Economic Fluctuations , 1998, Macroeconomic Dynamics.

[23]  Bettina Peters,et al.  Innovation in Germany: Results of the German Innovation Survey 2007 , 2005 .

[24]  Alfred Kleinknecht,et al.  Do Regions Matter for R&D? , 1992 .

[25]  J. Sutton.  Sunk Costs and Market Structure , 1991 .

[26]  Martin Biewen.  Measuring State Dependence in Individual Poverty Status: Are There Feedback Effects to Employment Decisions and Household Composition? , 2004, SSRN Electronic Journal.

[27]  Charles P. Himmelberg,et al.  R&D and internal finance: a panel study of small firms in high-tech industries , 1994 .

[28]  Massimo Riccaboni,et al.  Innovation and corporate growth in the evolution of the drug industry , 2001 .

[29]  M. Stadler,et al.  Financing Constraints and the Timing of Innovations in the German Services Sector , 1999 .

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

[31]  Mark Doms,et al.  Understanding Productivity: Lessons from Longitudinal Microdata , 2000 .

[32]  Emmanuel Duguet,et al.  Is Innovation Persistent at the Firm Level? An Econometric Examination Comparing the Propensity Score and Regression Methods , 2004 .

[33]  Jennifer F. Reinganum.  Uncertain Innovation and the Persistence of Monopoly , 1982 .

[34]  D. Cox,et al.  Parameter Orthogonality and Approximate Conditional Inference , 1987 .

[35]  Daniel A. Levinthal,et al.  ABSORPTIVE CAPACITY: A NEW PERSPECTIVE ON LEARNING AND INNOVATION , 1990 .

[36]  Almas Heshmati,et al.  Knowledge capital and performance heterogeneity: : A firm-level innovation study , 2002 .

[37]  David J. Teece,et al.  The Dynamic Capabilities of Firms , 2003 .

[38]  Stephen Roper,et al.  Location and network effects on innovation success: evidence for UK, German and Irish manufacturing plants , 2001 .

[39]  Morton I. Kamien,et al.  Market Structure and Innovation: A Survey , 1975 .

[40]  M. Rogers.  Networks, Firm Size and Innovation , 2004 .

[41]  Firm-Level Investment in France and the United States: An Exploration of What We Have Learned in Twenty Years , 1999 .

[42]  Manfred Stadler,et al.  Success breeds success. The dynamics of the innovation process , 1994 .

[43]  A. Kleinknecht.  Are There Schumpeterian Waves of Innovations , 1990 .

[44]  Luigi Orsenigo,et al.  The persistence of innovative activities: A cross-countries and cross-sectors comparative analysis , 2001 .

[45]  J. Stiglitz,et al.  Credit Rationing in Markets with Imperfect Information , 1981 .

[46]  Bettina Peters,et al.  Firm Level Innovation and Productivity - is There a Common Story Across Countries? , 2003 .

[47]  Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung.  Erfolge im Ausland : Herausforderungen im Inland , 2004 .

[48]  Dennis C. Mueller,et al.  The Firm Decision Process: An Econometric Investigation , 1967 .

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

[50]  Bruno Crépon,et al.  Research, Innovation, and Productivity: an Econometric Analysis at the Firm Level , 1998 .

[51]  Jeffrey M. Wooldridge,et al.  The Initial Conditions Problem in Dynamic, Nonlinear Panel Data Models with Unobserved Heterogeneity , 2002 .

[52]  F. Palm,et al.  Innovation in Enterprise Clusters: Evidence from Dutch Manufacturing , 2005 .

[53]  D. Third.  OECD/Eurostat . Oslo Manual-Guidelines for Collecting and Interpreting Technological Innovation Paris, France: , 2005 .

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

[55]  Paul Geroski,et al.  HOW PERSISTENTLY DO FIRMS INNOVATE , 1997 .

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

[57]  E. Cefis.  Is there persistence in innovative activities , 2003 .

[58]  Jeffrey M. Woodbridge.  Econometric Analysis of Cross Section and Panel Data , 2002 .

[59]  Kenneth L. Judd,et al.  On the Performance of Patents , 1985 .

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

[61]  P. Stoneman,et al.  The Economic Analysis of Technological Change , 1983 .

[62]  Almarin Phillips,et al.  Technology and Market Structure: A Study of the Aircraft Industry , 1971 .

[63]  Steen Winther Blindum.  Relaxing the Strict Exogeneity Assumption in a Dynamic Random Probit Model , 2003 .

[64]  P. Bishop,et al.  External ownership and innovation in the United Kingdom , 1999 .

[65]  Bo E. Honoré,et al.  Panel Data Discrete Choice Models with Lagged Dependent Variables , 2000 .

[66]  Edwin Mansfield,et al.  Industrial Research and Technological Innovation: An Econometric Analysis , 1968 .

[67]  D. Teece,et al.  The Dynamic Capabilities of Firms: an Introduction , 1994 .

[68]  P. Geroski.  What do we know about entry , 1995 .

[69]  J. Kadane.  Structural Analysis of Discrete Data with Econometric Applications , 1984 .

[70]  R. Nelson.  Modelling the Connections in the Cross Section between Technical Progress and R&D Intensity , 1988 .