Is Money All? Financing Versus Knowledge and Demand Constraints to Innovation
AbstractThe paper adds to the scattered empirical evidence on the role of obstacles to innovation in a three-fold way. First, we correct for the usual sample selection bias by filtering out firms not interested in innovation from 'potential innovators'. We then analyse the impact of obstacles on the translation of firms' engagement in innovative activities onto actual innovative outputs. Second, we assess what mostly affects firms' rate of failure in this process, whether finance or, rather, knowledge or demand-related constraints. Third, we do so in a panel framework, which allows to account for endogeneity and firms' unobserved heterogeneity through individual effects. We find that demand- and market-related factors are as important as financing conditions in determining firms' innovation failures. This evidence puts much of the latest hype on finance in perspective and brings back into the picture traditional demand and market structure arguments of why firms fail to innovate. The empirical analysis is based on an unbalanced panel of firm data from four waves of the UK Community Innovation Survey (CIS) between 2002 and 2010 merged with the UK Business Structure Database.
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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 2013-01.
Date of creation: 09 Oct 2013
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Other versions of this item:
- Gabriele Pellegrino & Mark J. Maria Savona, 2013. "Is money all? Financing versus knowledge and demand constraints to innovation," Working Papers 2013/21, Institut d'Economia de Barcelona (IEB).
- Pellegrino, Gabriele & Savona, Maria, 2013. "Is money all? Financing versus knowledge and demand constraints to innovation," MERIT Working Papers 029, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-10-18 (All new papers)
- NEP-INO-2013-10-18 (Innovation)
- NEP-KNM-2013-10-18 (Knowledge Management & Knowledge Economy)
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