Incentives and uncertainty: an empirical analysis of the impact of demand on innovation
AbstractWe study the impact of demand on innovation. By focusing on a sample of small- and medium-sized enterprises in several industries and European countries, we analyse how demand stimulates innovation by providing economic incentives and reducing uncertainty. Considering the size of the market as a proxy for the presence of demand, we find support for the idea that the presence of incentives stimulates innovation. This is particularly true for process innovation. In considering interaction with customers as a way to reduce uncertainty, we find that firms that see customers as the most important sources of information for both innovation ideas and completion, tend to introduce product innovations. Firm size, R&D expenditure and sectoral effects also matter. Copyright The Author 2008. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved., Oxford University Press.
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Bibliographic InfoPaper provided by SPRU - Science and Technology Policy Research, University of Sussex in its series SPRU Working Paper Series with number 163.
Length: 35 pages
Date of creation: 01 Nov 2007
Date of revision:
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demand; product innovation; process innovation;
Other versions of this item:
- Roberto Fontana & Marco Guerzoni, 2008. "Incentives and uncertainty: an empirical analysis of the impact of demand on innovation," Cambridge Journal of Economics, Oxford University Press, vol. 32(6), pages 927-946, November.
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-12-08 (All new papers)
- NEP-INO-2007-12-08 (Innovation)
- NEP-MIC-2007-12-08 (Microeconomics)
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