Hindering Factors to Innovation: A Panel Data Analysis

The existence of companies developing innovative activities is a key factor for a competitive economy. Firms recognize the importance of performing innovative activities to raise their productivity and create an advantage towards their competitors, consolidate its position in the market and gain extra profits. Innovation projects have a very uncertain outcome, thus exposing the firm to additional risks. When the economic environment is adverse, firms tend to reduce the amount spent in R&D and deleverage innovative activities. As many innovation projects succeed, others fail. Very often firms decide to abandon their innovative projects which were jeopardized for several obstacles. The obstacles to innovation perceived by the firms will depend on their particular characteristics. The type of innovation being performed will naturally involve a different variety and extent of resources, moreover, the stage of the process will require the use of different resources with various intensities. Using a panel of firms collected from the Portuguese CIS, we observe that the abandon of innovative activities fell during the crisis, contrarily to our first expectation. This finding reinforces the suspicions that firms continue their innovative actions in turbulent environments such as the crisis, going along with the Schumpeter Mark I hypothesis. A deep understanding about the effective the role of the different type of barriers firms face in their innovative process will allow the design of more accurate policy recommendations.