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Is Demand-Pulled Innovation Equally Important in Different Groups of Firms?

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Author Info
Mariacristina Piva (Catholic University of Piacenza)
Marco Vivarelli () (Catholic University of Piacenza, CSGR Warwick, Max Planck Institute of Economics Jena and IZA Bonn)

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Abstract

Previous empirical literature - mainly cross-sectional - has tested the demand-pull hypothesis and found that overall, evidence does not conflict with the idea that innovation may be driven by output. Using a balanced panel of 216 Italian manufacturing firms over the 1995-2000 period, and checking for fixed effects, time, sectoral and size dummies and for the pathdependent nature of R&D, we also find a (barely significant) role of sales in inducing R&D expenditures. However, at the micro level, the demand-pull effect plays a varying role for the different sub-samples of firms. In particular, exporting firms, those which are liquidityconstrained, those not receiving public subsidies and those not heading a business group, seem to be particularly sensitive to sales in deciding their R&D expenditures. These microeconometric results have been obtained using a Least Squares Dummy Variable Corrected (LSDVC) estimator, a recently-proposed panel data technique particularly suitable for small samples.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1982.

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Length: 31 pages
Date of creation: Feb 2006
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Handle: RePEc:iza:izadps:dp1982

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Related research
Keywords: R&D expenditures; demand-pull; innovative firms; LSDVC estimator;

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Find related papers by JEL classification:
O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Martin Woerter & Stephen Roper, 2008. "Openness and Innovation - Home and Export Demand Effects on Manufacturing Innovation: Panel Data Evidence for Ireland and Switzerland," KOF Working papers 08-210, KOF Swiss Economic Institute, ETH Zurich. [Downloadable!]
  2. Elizabeth Webster & Paul H. Jensen, 2009. "Macroeconomic Conditions and Successful Commercialization," Melbourne Institute Working Paper Series wp2009n09, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne. [Downloadable!]
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