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Persistence of Innovation Stylised Facts and Panel Data Evidence

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  • Bettina Peters

Abstract

This paper investigates whether firms innovate persistently or discontinuously over time using an innovation panel data set on German manufacturing and service firms for the period 1994–2002. It turns out that innovation behaviour is permanent at the firm–level to a very large extent. Using a dynamic random effects discrete choice model and a new estimator recently proposed by Wooldrigde (2005), I further shed some light on the driving forces for this phenomenon. The econometric results show that past innovation experience is an important determinant for manufacturing as well as for service sector firms, and hence confirm the hypothesis of true state dependence. In addition, the results highlight the important role of knowledge provided by skilled employees and unobserved individual heterogeneity in explaining the persistence of innovation.

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Paper provided by DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies in its series DRUID Working Papers with number 06-30.

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Date of creation: 2006
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Handle: RePEc:aal:abbswp:06-30
Contact details of provider: Web page: http://www.druid.dk/

Keywords: Innovation; persistence; state dependence; unobserved heterogeneity; dynamic random effects panel probit model;

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Find related papers by 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
  • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
  • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
  • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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