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Profit differentials and innovation

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  • Elena Cefis
  • Matteo Ciccarelli

Abstract

The article aims to investigate empirically the effects of innovative activities on corporate profitability, using a panel of 267 UK manufacturing firms, over the period 1988-1992. Using the Bayesian approach to, explicitly, consider heterogeneity among firms, we find: (i) a positive and well-determined effect of innovation on profits that smoothly decreases as time passes by; (ii) a difference in profitability between innovators and non-innovators, greater when the comparison is between persistent innovators and non-innovators; and (iii) a long-run persistence in profit differentials.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Economics of Innovation and New Technology.

Volume (Year): 14 (2005)
Issue (Month): 1-2 ()
Pages: 43-61

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Handle: RePEc:taf:ecinnt:v:14:y:2005:i:1-2:p:43-61

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Related research

Keywords: Innovation; Profitability; Firms differentials; Bayesian estimation; Panel data models;

References

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  1. Aghion, P. & Howitt, P., 1990. "A Model Of Growth Through Creative Destruction," DELTA Working Papers, DELTA (Ecole normale supérieure) 90-12, DELTA (Ecole normale supérieure).
  2. Geroski, Paul A & Samiei, Hossein & Van Reenen, John, 1996. "How Persistently do Firms Innovate?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1433, C.E.P.R. Discussion Papers.
  3. Fabio Canova & Albert Marcet, 1995. "The poor stay poor: Non-convergence across countries and regions," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 137, Department of Economics and Business, Universitat Pompeu Fabra, revised Jun 1999.
  4. Acs, Zoltan J & Audretsch, David B, 1989. "Patents as a Measure of Innovative Activity," Kyklos, Wiley Blackwell, Wiley Blackwell, vol. 42(2), pages 171-80.
  5. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  6. Malerba, Franco & Orsenigo, Luigi, 1995. "Schumpeterian Patterns of Innovation," Cambridge Journal of Economics, Oxford University Press, Oxford University Press, vol. 19(1), pages 47-65, February.
  7. Hsiao, C. & Pesaran, M. H. & Tahmiscioglu, A. K., 1998. "Bayes Estimation of Short-run Coefficients in Dynamic Panel Data Models," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 9804, Faculty of Economics, University of Cambridge.
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