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Interdependence and spillovers: is firm performance affected by others’ innovation activities?

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  • Pedro de Faria
  • Francisco Lima

Abstract

The creation of new knowledge is a case in which agents' behaviour can affect the performance of other actors positively, given that new knowledge creates positive externalities in the market. In this context, we investigate the existence of performance spillovers associated with innovation activities by quantifying the innovation produced in surrounding firms and controlling for the fact that a firm is itself an innovation producer. We use data from the Third Community Innovation Survey (CIS III) that measures innovation in a broad way, not reducing it to R&D and patents, which departs from previous literature on spillovers. Furthermore, to tackle the endogeneity of the innovation variables on the firm production decision, we resort to the firm intellectual property protection methods as an instrument. We found a positive spillover of innovation on firm value added. The results also show that process innovation spillovers are more prevalent than product innovation spillovers.

Suggested Citation

  • Pedro de Faria & Francisco Lima, 2012. "Interdependence and spillovers: is firm performance affected by others’ innovation activities?," Applied Economics, Taylor & Francis Journals, vol. 44(36), pages 4765-4775, December.
    • Handle: RePEc:taf:applec:v:44:y:2012:i:36:p:4765-4775
    DOI: 10.1080/00036846.2011.560108
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    Cited by:

    1. Yujun Huang & Zhihao Huang, 2024. "The Impact of Climate Change Transition Innovations on the Default Risk," Sustainability, MDPI, vol. 16(11), pages 1-23, May.
    2. Mate-Sanchez-Val, Mariluz & Harris, Richard, 2014. "Differential empirical innovation factors for Spain and the UK," Research Policy, Elsevier, vol. 43(2), pages 451-463.
    3. Liliana Araújo & Sandra T. Silva & Aurora A.C. Teixeira, 2013. "Knowledge spillovers and economic performance of firms located in depressed areas: does geographical proximity matter?," FEP Working Papers 488, Universidade do Porto, Faculdade de Economia do Porto.
    4. Ferreira, João J.M. & Fernandes, Cristina I. & Veiga, Pedro Mota, 2024. "The effects of knowledge spillovers, digital capabilities, and innovation on firm performance: A moderated mediation model," Technological Forecasting and Social Change, Elsevier, vol. 200(C).

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