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Innovation Complimentarity and Scale of Production

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  • Miravete, Eugenio J
  • Pernías, Jose C

Abstract

This Paper is an empirical study on the existence of complementarity between product and process innovation. We present an econometrically feasible model that uses the information contained in the innovation profile of each firm to test for the existence of complementarity among production and innovation strategies. We apply the model to analyse the Spanish ceramic tiles industry where the adoption of the single firing furnace in the 1980s facilitated the introduction of new product designs as well as to opening new ways of organizing production. Our econometric results show that there is significant complementarity between product and process innovation. We are able to separate the nature of complementarity relationships and thus, our results show that both intrinsic – technologically driven – and induced complementarity – due to firms unobserved heterogeneity – are significant. Small firms tend to be more innovative overall.

Suggested Citation

  • Miravete, Eugenio J & Pernías, Jose C, 2004. "Innovation Complimentarity and Scale of Production," CEPR Discussion Papers 4483, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:4483
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    Cited by:

    1. Johannes Van Biesebroeck, 2007. "Complementarities in automobile production," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(7), pages 1315-1345.
    2. Cassiman, Bruno & Perez-Castrillo, David & Veugelers, Reinhilde, 2002. "Endogenizing know-how flows through the nature of R&D investments," International Journal of Industrial Organization, Elsevier, pages 775-799.
    3. Cassiman, Bruno & Veugelers, Reinhilde, 2002. "Complementarity in the Innovation Strategy: Internal R&D, External Technology Acquisition and Cooperation," CEPR Discussion Papers 3284, C.E.P.R. Discussion Papers.
    4. José M. Labeaga & Ester Martínez Ros, "undated". "Persistence and ability in the innovation decisions," Working Papers 2005-16, FEDEA.
    5. Mohnen, Pierre & Roller, Lars-Hendrik, 2005. "Complementarities in innovation policy," European Economic Review, Elsevier, vol. 49(6), pages 1431-1450, August.
    6. Mairesse, Jacques & Mohnen, Pierre, 2010. "Using Innovation Surveys for Econometric Analysis," Handbook of the Economics of Innovation, Elsevier.
    7. Gerard Ballot & Fathi Fakhfakh & Fabrice Gallia & Ammon Salter, 2011. "The Fateful Triangle Complementarities between product, process and organizational innovation in the UK and France," TEPP Working Paper 2011-05, TEPP.
    8. Tobias Kretschmer & Eugenio J. Miravete & Jose C. Pernias, 2012. "Competitive Pressure and the Adoption of Complementary Innovations," American Economic Review, American Economic Association, pages 1540-1570.
    9. Hottenrott, Hanna & Rexhäuser, Sascha & Veugelers, Reinhilde, 2012. "Green innovations and organizational change: Making better use of environmental technology," ZEW Discussion Papers 12-043, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    10. Sharon Novak & Scott Stern, 2007. "Complementarity Among Vertical Integration Decisions: Evidence from Automobile Product Development," NBER Working Papers 13232, National Bureau of Economic Research, Inc.
    11. repec:enr:rpaper:0020 is not listed on IDEAS
    12. Leiponen, Aija, 2005. "Skills and innovation," International Journal of Industrial Organization, Elsevier, vol. 23(5-6), pages 303-323, June.
    13. An, Henry, 2012. "Complementarities in Production Technologies: An Empirical Analysis of the Dairy Industry," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124653, Agricultural and Applied Economics Association.
    14. Boris Lokshin & Rene Belderbos & Martin Carree, 2006. "Internal and external R&D: complements or substitutes? Evidence from a dynamic panel data model," Hi-Stat Discussion Paper Series d06-163, Institute of Economic Research, Hitotsubashi University.
    15. Marco Capasso & Nelson Correa, 2010. "ICT and Knowledge Complementarities: A Factor Analysis on Growth," Chapters,in: Innovation and Economic Development, chapter 8 Edward Elgar Publishing.
    16. Miravete, Eugenio J, 2007. "Competing with Menus of Tariff Options," CEPR Discussion Papers 6279, C.E.P.R. Discussion Papers.
    17. Cassiman, Bruno & Veugelers, Reinhilde, 2002. "Complementarity in the innovation strategy: Internal R&D, external technology acquisition, and cooperation in R&D," IESE Research Papers D/457, IESE Business School.
    18. Vives, Xavier, 2005. "Games with strategic complementarities: New applications to industrial organization," International Journal of Industrial Organization, Elsevier, vol. 23(7-8), pages 625-637, September.
    19. Doran, Justin, 2012. "Are different forms of innovation complements or substitutes?," MPRA Paper 44580, University Library of Munich, Germany.

    More about this item

    Keywords

    complementarity; process innovation; product innovation; supermodularity; unobserved heterogeneity;

    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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