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Incentives and uncertainty: an empirical analysis of the impact of demand on innovation

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  • Roberto Fontana

    ()
    (University of Pavia & CESPRI, Bocconi University, Italy)

  • Marco Guerzoni

    ()
    (Schiller Universität)

Abstract

We 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 Info

Paper provided by SPRU - Science and Technology Policy Research, University of Sussex in its series SPRU Working Paper Series with number 163.

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Length: 35 pages
Date of creation: 01 Nov 2007
Date of revision:
Handle: RePEc:sru:ssewps:163

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Keywords: demand; product innovation; process innovation;

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References

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  1. Eric von Hippel, 1986. "Lead Users: A Source of Novel Product Concepts," Management Science, INFORMS, vol. 32(7), pages 791-805, July.
  2. Kraft, Kornelius & Czarnitzki, Dirk, 2001. "Firm leadership and innovative performance: evidence from seven EU Countries," ZEW Discussion Papers 01-35, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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Citations

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Cited by:
  1. 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.
  2. Guerzoni, Marco & Raiteri, Emilio, 2012. "Innovative public procurement and R&D Subsidies: hidden treatment and new empirical evidence on the technology policy mix in a quasi-experimental setting," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 201218, University of Turin.
  3. Courvisanos, Jerry, 2009. "Political aspects of innovation," Research Policy, Elsevier, vol. 38(7), pages 1117-1124, September.
  4. Srinuan, Chalita & Srinuan, Pratompong & Bohlin, Erik, 2012. "Exploring mobile pricing strategies and innovations in the Thai mobile communications market," 19th ITS Biennial Conference, Bangkok 2012: Moving Forward with Future Technologies - Opening a Platform for All 72522, International Telecommunications Society (ITS).
  5. Leo Wangler, 2010. "Renewables and Innovation - Empirical Assessment and Theoretical Considerations," Jena Economic Research Papers 2010-002, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  6. José García-Quevedo & Gabriele Pellegrino & Maria Savona, 2014. "Reviving demand-pull perspectives: the effect of demand uncertainty and stagnancy on R&D strategy," Working Papers 2014/11, Institut d'Economia de Barcelona (IEB).
  7. Uwe Cantner & Marco Guerzoni & Arianna Martinelli, 2012. "Innovation and market dynamics: A two-mode network approach to user-producer relation," LEM Papers Series 2012/09, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  8. Andreas Chai & Alessio Moneta, 2014. "Escaping Satiation Dynamics: Some Evidence from British Household Data," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 234(2-3), pages 299-327, April.
  9. Pascha, Werner & Storz, Cornelia, 2008. "How are markets created? The case of Japan's silver market," Duisburger Arbeitspapiere Ostasienwissenschaften 78/2008, University of Duisburg-Essen, Institute of East Asian Studies IN-EAST.
  10. Nicoletta Corrocher & Lorenzo Zirulia, 2007. "Demand and Innovation in Services: the Case of Mobile Communications," KITeS Working Papers 199, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Mar 2007.

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