The Role Of Extramural R&D And Scientific Knowledge In Creating High Novelty Innovations: An Examination Of Manufacturing And Service Firms In Spain

This paper studies the effect of extramural R&D and of scientific knowledge in the creation of high novelty innovations. We first argue that extramural R&D brings in higher benefits, but also higher costs, when trying to obtain high novelty vs. low novelty innovations. Second, we propose that extramural investments in scientific R&D allow the firm to access distant knowledge and to break the path dependence induced by its resource endowments. However, investments in scientific R&D are also subject to the risks of the ‘two worlds’ that result from the collaboration of firms and universities and research centres. Our hypotheses are tested with data from the Panel of Technological Innovation, which describes the innovative activities of Spanish firms from 2005 to 2013. Our results show an inverted U-shaped relationship between extramural R&D and the share of sales from new products. They also reveal that extramural R&D investments increase the proportion of sales from high novelty products more than from low novelty products (a 21% vs. a 2%). However, an excessive reliance on extramural R&D reduces more the sales from high novelty innovations than from low novelty innovations (a 52% vs. a 32%). Finally, extramural R&D performed by universities and research centres raises the share of sales from high novelty innovations. However, collaboration with non-scientific sources is more impactful than collaboration with scientific ones, no matter the nature of the innovation considered.