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Is money all? Financing versus knowledge and demand constraints to innovation

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  • Pellegrino, Gabriele

    ()
    (University of Barcelona, and Università Cattolica del Sacro Cuore, Piacenza and Milano)

  • Savona, Maria

    ()
    (SPRU, University of Sussex,)

Abstract

The 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 Info

Paper provided by United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT) in its series MERIT Working Papers with number 029.

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Date of creation: 2013
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Handle: RePEc:unm:unumer:2013029

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Keywords: Barriers to innovation; Innovative firms; Potential Innovators; Failed Innovators; Panel data;

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References

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  1. Jacques Mairesse & Pierre Mohnen, 2002. "Accounting for Innovation and Measuring Innovativeness: An Illustrative Framework and an Application," American Economic Review, American Economic Association, American Economic Association, vol. 92(2), pages 226-230, May.
  2. Lin, Zhengxi & Baldwin, John R., 2001. "Impediments to Advanced Technology Adoption for Canadian Manufacturers," Analytical Studies Branch Research Paper Series 2001173e, Statistics Canada, Analytical Studies Branch.
  3. Mariacristina Piva & Marco Vivarelli, 2007. "Is demand-pulled innovation equally important in different groups of firms?," Cambridge Journal of Economics, Oxford University Press, Oxford University Press, vol. 31(5), pages 691-710, September.
  4. Alessandra Canepa & Paul Stoneman, 2008. "Financial constraints to innovation in the UK: evidence from CIS2 and CIS3," Oxford Economic Papers, Oxford University Press, vol. 60(4), pages 711-730, October.
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  6. Hottenrott, Hanna & Peters, Bettina, 2011. "Innovative capability and financing constraints for innovation: More money, more innovation?," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 09-081 [rev.], ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  7. D’Este, Pablo & Iammarino, Simona & Savona, Maria & von Tunzelmann, Nick, 2012. "What hampers innovation? Revealed barriers versus deterring barriers," Research Policy, Elsevier, Elsevier, vol. 41(2), pages 482-488.
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  12. Pierre Blanchard & Jean Pierre Huiban & Antonio Musolesi & Patrick Sevestre, 2013. "Where there is a will, there is a way? Assessing the impact of obstacles to innovation," Working Papers, Institut National de la Recherche Agronomique, France 172155, Institut National de la Recherche Agronomique, France.
  13. Mariacristina Piva & Marco Vivarelli, 2009. "The role of skills as a major driver of corporate R&D," International Journal of Manpower, Emerald Group Publishing, Emerald Group Publishing, vol. 30(8), pages 835-852, November.
  14. Jeffrey M. Wooldridge, 2005. "Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 20(1), pages 39-54.
  15. Klepper, Steven, 1996. "Entry, Exit, Growth, and Innovation over the Product Life Cycle," American Economic Review, American Economic Association, American Economic Association, vol. 86(3), pages 562-83, June.
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  17. Simona Iammarino & Francesca Sanna-Randaccio & Maria Savona, 2007. "The perception of obstacles to innovation. Multinational and domestic firms in Italy," Working Papers of BETA 2007-12, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  18. Jaeyong Song & Paul Almeida & Geraldine Wu, 2003. "Learning--by--Hiring: When Is Mobility More Likely to Facilitate Interfirm Knowledge Transfer?," Management Science, INFORMS, INFORMS, vol. 49(4), pages 351-365, April.
  19. Frederique Savignac, 2008. "Impact Of Financial Constraints On Innovation: What Can Be Learned From A Direct Measure?," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 17(6), pages 553-569.
  20. Dominique Tourigny & Can Le, 2004. "Impediments to innovation faced by Canadian manufacturing firms," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 13(3), pages 217-250.
  21. Pablo D'Este & Francesco Rentocchini & Jaider Manuel Vega Jurado, 2010. "Lowering barriers to engage in innovation: evidence from the Spanish innovation survey," Openloc Working Papers, Public policies and local development 1020, Public policies and local development.
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Citations

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Cited by:
  1. José García-Quevedo & Gabriele Pellegrino & Maria Savona, 2014. "Reviving demand-pull perspectives: The effect of demand uncertainty and stagnancy on R&D strategy," SPRU Working Paper Series, SPRU - Science and Technology Policy Research, University of Sussex 2014-09, SPRU - Science and Technology Policy Research, University of Sussex.
  2. Giovanni Marin & Alberto Marzucchi & Roberto Zoboli, 2014. "SMEs and Barriers to Eco-Innovation in EU: A Diverse Palette of Greens," SEEDS Working Papers, SEEDS, Sustainability Environmental Economics and Dynamics Studies 0614, SEEDS, Sustainability Environmental Economics and Dynamics Studies, revised Apr 2014.
  3. Heike Belitz & Anna Lejpras, 2014. "Financing Patterns of Innovative SMEs and the Perception of Innovation Barriers in Germany," Discussion Papers of DIW Berlin 1353, DIW Berlin, German Institute for Economic Research.
  4. Vásquez-Urriago, Angela & Barge-Gil, Andrés & Modrego, Aurelia, 2014. "Which firms benefit more from being located in a Science and Technology Park? Empirical evidence for Spain," MPRA Paper 55130, University Library of Munich, Germany.

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