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Modeling the virtuous circle of innovation. A test on Italian firms


  • Francesco Bogliacino
  • Matteo Lucchese
  • Leopoldo Nascia
  • Mario Pianta


This article investigates the “virtuous circle” between innovative inputs, outputs, and economic performance with a three-equation model highlighting feedback loops and simultaneous relations. An empirical test is conducted of innovative expenditure, innovative sales, and economic results in a sample of Italian manufacturing firms, comparing occasional and serial innovators. The data, for 1998–2007, are drawn from a rich panel of Italian firms with 20 or more employees compiled by the Italian National Institute of Statistics including three waves of Community Innovation Surveys. The model extends that developed at the industry level by Bogliacino and Pianta (Industrial and Corporate Change, 2013a, 22(3), 649–678; Innovation and demand in industry dynamics: R&D, new products and profits, in A. Pyka and E. S. Andersen (eds), Long Term Economic Development, Economic Complexity and Evolution. Springer-Verlag: Berlin, 2013b) and confirms those earlier findings. For the core of persistent innovators, there are complex links at play in different phases of the innovation process and in the feedback between economic success and sustained innovation expenditure.

Suggested Citation

  • Francesco Bogliacino & Matteo Lucchese & Leopoldo Nascia & Mario Pianta, 2017. "Modeling the virtuous circle of innovation. A test on Italian firms," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 26(3), pages 467-484.
  • Handle: RePEc:oup:indcch:v:26:y:2017:i:3:p:467-484.

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    Cited by:

    1. Sui, Hongguang & Geng, Simin & Zhou, Jin & Raza, Ali & Aziz, Noshaba, 2023. "Fiscal institutional reform and export product quality: A Quasi-experimental research on counties managed directly by provinces," Economic Modelling, Elsevier, vol. 126(C).
    2. Giovanni Dosi & Xiaodan Yu, 2017. "Technological catching-up, sales dynamics and employment growth: evidence from China's manufacturing firms," LEM Papers Series 2017/27, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    3. Pianta, Mario & Coveri, Andrea & Reljic, Jelena, 2021. "The Sectoral Innovation Database, 1994-2016. Methodological Notes," MPRA Paper 106780, University Library of Munich, Germany.
    4. Aronica, Martina & Fazio, Giorgio & Piacentino, Davide, 2022. "A micro-founded approach to regional innovation in Italy," Technological Forecasting and Social Change, Elsevier, vol. 176(C).
    5. Mario Pianta & Jelena Reljic, 2022. "The good jobs-high innovation virtuous circle," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 39(3), pages 783-811, October.
    6. Ilaria Gandin & Claudio Cozza, 2019. "Can we predict firms’ innovativeness? The identification of innovation performers in an Italian region through a supervised learning approach," PLOS ONE, Public Library of Science, vol. 14(6), pages 1-16, June.
    7. Brancati, Emanuele & Brancati, Raffaele & Guarascio, Dario & Zanfei, Antonello, 2020. "In Times of Trouble: Innovative Drivers of External Competitiveness for Small Businesses during the Great Recession," GLO Discussion Paper Series 639, Global Labor Organization (GLO).
    8. Giuseppe Medda, 2020. "External R&D, product and process innovation in European manufacturing companies," The Journal of Technology Transfer, Springer, vol. 45(1), pages 339-369, February.
    9. Emanuele Brancati & Raffaele Brancati & Dario Guarascio & Antonello Zanfei, 2022. "Innovation drivers of external competitiveness in the great recession," Small Business Economics, Springer, vol. 58(3), pages 1497-1516, March.
    10. Segundo Abrahán Sanabria Gómez, 2022. "Progreso tecnológico y desigualdades económicas: una aproximación empírica para Colombia (1974-2015)," Apuntes del Cenes, Universidad Pedagógica y Tecnológica de Colombia, vol. 41(73), pages 85-112, February.
    11. Sverre J. Herstad & Tore Sandven, 2020. "A closer look at the relationship between innovation and employment growth at the firm level," Journal of Evolutionary Economics, Springer, vol. 30(2), pages 375-399, April.
    12. Juliao-Rossi, Jorge & Forero-Pineda, Clemente & Losada-Otalora, Mauricio & Peña-García, Nathalie, 2020. "Trajectories of innovation: A new approach to studying innovation performance," Journal of Business Research, Elsevier, vol. 115(C), pages 322-333.
    13. Grillitsch, Markus & Schubert, Torben & Srholec, Martin, 2019. "Knowledge base combinations and firm growth," Research Policy, Elsevier, vol. 48(1), pages 234-247.
    14. Sverre J. Herstad & Marte C. W. Solheim & Marit Engen, 2021. "Collected worker experiences, knowledge management practices and service innovation in urban Norway," Papers in Regional Science, Wiley Blackwell, vol. 100(6), pages 1501-1525, December.
    15. Pianta, Mario & Reljic, Jelena, 2021. "Employment quality, economic performance and wages in Europe. Exploring the virtuous circle," MPRA Paper 109797, University Library of Munich, Germany.
    16. Kofi Mintah Oware & Thathaiah Mallikarjunappa, 2021. "Does Technological Innovation Compete or Complement Job Employment? Effect of Technological Innovation and Financial Performance," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 64(4), pages 899-922, December.
    17. Thiago Caliari & Philipe Scherer Mendes & Márcia Rapini & Camila Tolentino, 2021. "Technological Cumulativeness and Innovation in Brazilian Manufacturing Industry: Evidences from Brazilian Innovation Surveys 2008, 2011, and 2014," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 12(2), pages 876-898, June.

    More about this item

    JEL classification:

    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • L8 - Industrial Organization - - Industry Studies: Services
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe


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