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Concentration on the few: mechanisms behind a falling share of innovative firms in Germany

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  • Rammer, Christian
  • Schubert, Torben

Abstract

Innovation activities in the German business sector showed two opposing trends over the past two decades: While total innovation expenditures grew substantially, the number of firms conducting innovation activities fell sharply. In this paper, we explore the mechanisms behind the declining trend in the share of innovation active firms. Considering both input (R&D activities) and output (introduction of innovations), we model innovation decisions as a multi-stage process using continuous-time Markov chain analysis. We base our analyses on a 14-year panel from the German part of the Community Innovation Survey. Our results show that smaller firms and firms in sectors with less innovation competition are more likely to stop innovating. We also show that better financial situation and public funding can mitigate the trend towards a falling share of innovating and R&D-performing firms.

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  • Rammer, Christian & Schubert, Torben, 2018. "Concentration on the few: mechanisms behind a falling share of innovative firms in Germany," Research Policy, Elsevier, vol. 47(2), pages 379-389.
  • Handle: RePEc:eee:respol:v:47:y:2018:i:2:p:379-389
    DOI: 10.1016/j.respol.2017.12.002
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    1. Davide Castellani & Mariacristina Piva & Torben Schubert & Marco Vivarelli, 2018. "The source of the US /EU Productivity Gap:Less and less effective R&D," LEM Papers Series 2018/16, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    2. Castellani, Davide & Piva, Mariacristina & Schubert, Torben & Vivarelli, Marco, 2019. "R&D and productivity in the US and the EU: Sectoral specificities and differences in the crisis," Technological Forecasting and Social Change, Elsevier, vol. 138(C), pages 279-291.
    3. Krieger, Bastian & Licht, Georg & Pellens, Maikel, 2018. "New perspectives in European innovation policy," ZEW policy briefs 7/2018, ZEW - Leibniz Centre for European Economic Research.
    4. Holl, Adelheid & Peters, Bettina & Rammer, Christian, 2020. "Local knowledge spillovers and innovation persistence of firms," ZEW Discussion Papers 20-005, ZEW - Leibniz Centre for European Economic Research.

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    More about this item

    Keywords

    R&D; Innovation; Concentration; SMEs; Decline;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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