Innovation Capabilities and Learning: Virtuous and Vicious Circles

There is no doubt about the fact that innovation is a key to economic growth (Freeman, 1994; Fagerberg, 1994, 2009) and that the development of advanced technologies is an important factor in the competitive advantage of a country, a region, or enterprise (Freeman, 1987; Porter, 1990). So it can be stated that the competitive strength of a state or firm depends, partially, on its innovation capabilities. In this chapter we analyze the improvement of such innovation capabilities in firms that have carried out publicly supported R&D projects. Therefore we study, first of all, the intensity of such learning effects based on internal projects and on the technology transfer flows between partners of the cooperative R&D projects. A second aspect of our analysis is the elaboration of the profile of the firms with higher or lower learning effects. This chapter points out that the firms with a low innovative level have a distinctly lower learning capability than the more innovative firms. Moreover, in some circumstances the firms with a free-rider behavior seem to show, at the same time, a less intensive learning effect. So the main conclusions of this chapter are that the less innovative firms are trapped in a vicious circle and can reduce the technological gap with respect to other firms only by extraordinary efforts. For this reason the improvement of the learning capabilities of a firm should be an important goal of public intervention in the field of technological change and R&D; to initiate a ‘catching-up’ process in the less innovative firms, financial support instruments should be combined with technical support and intensive consultancy services.