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Firm size and Innovation in European Manufacturing

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  • Mario Pianta
  • Andrea Vaona

Abstract

The paper investigates the differences between small, medium-sized and large firms regarding their performance in the introduction of new products and processes. After a review of the relevant literature, two models are proposed and tested in search for different business strategies and innovation inputs connected to product and process innovations. The empirical analysis uses innovation survey (CIS 2) data at the industry level for 22 manufacturing sectors, broken down in three firm size classes, for eight European countries. Special attention is devoted to tackling the issues of possible endogeneity of the regressors and of unobserved sectoral heterogeneity. The results - strengthening the findings of previous studies - show that product and process innovations, though having some complementarities, are associated to different innovative inputs and strategies pursued by firms. Systematic differences also emerge between the behaviour of large firms and SMEs.

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File URL: http://www.ifw-members.ifw-kiel.de/publications/firm-size-and-innovation-in-european-manufacturing/kap1284.pdf
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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1284.

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Length: 21 pages
Date of creation: Jul 2006
Date of revision:
Handle: RePEc:kie:kieliw:1284

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Related research

Keywords: Product innovation; Process innovation; Firm size; Determinants of innovation; European industries;

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References

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  1. Wansbeek, Tom & Kapteyn, Arie, 1989. "Estimation of the error-components model with incomplete panels," Journal of Econometrics, Elsevier, vol. 41(3), pages 341-361, July.
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  9. Tommaso Antonucci & Mario Pianta, 2002. "Employment Effects of Product and Process Innovation in Europe," International Review of Applied Economics, Taylor & Francis Journals, vol. 16(3), pages 295-307.
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  15. Love, James H & Ashcroft, Brian, 1999. " Market versus Corporate Structure in Plant-Level Innovation Performance," Small Business Economics, Springer, vol. 13(2), pages 97-109, September.
  16. Cohen, Wesley M & Klepper, Steven, 1996. "Firm Size and the Nature of Innovation within Industries: The Case of Process and Product R&D," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 232-43, May.
  17. Acs, Zoltan J & Audretsch, David B, 1988. "Innovation in Large and Small Firms: An Empirical Analysis," American Economic Review, American Economic Association, vol. 78(4), pages 678-90, September.
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  19. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August.
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