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Persistence of Innovation: Stylised Facts and Panel Data Evidence

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  • Bettina Peters

    (Centre for European Economic Research ZEW)

Abstract

This paper investigates whether firms innovate persistently or discontinuously over time using an innovation panel data set on German manufacturing and service firms for the period 1994-2002. We find that innovation behaviour is permanent at the firm-level to a very large extent. Using a dynamic random effects discrete choice model and a new estimator recently proposed by Wooldrigde (2005), we further shed some light on the driving forces for this phenomenon. The econometric results confirm the hypothesis of true state dependence for manufacturing as well as for service sector firms. In addition to past innovation experience, the results further highlight the important role of knowledge provided by skilled employees and unobserved individual heterogeneity in explaining the persistence of innovation.

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File URL: http://128.118.178.162/eps/dev/papers/0511/0511021.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Development and Comp Systems with number 0511021.

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Length: 50 pages
Date of creation: 21 Nov 2005
Date of revision:
Handle: RePEc:wpa:wuwpdc:0511021

Note: Type of Document - pdf; pages: 50
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Web page: http://128.118.178.162

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Keywords: innovation; persistence; state dependence; unobserved heterogeneity; dynamic random effects panel probit model;

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