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Persistent Product Innovation and Market-oriented Behaviour: the Impact on Firms' Performance

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  • Eleonora Bartoloni

    () (ISTAT, Istituto Nazionale di Statistica)

  • Maurizio Baussola

    () (DISCE, Università Cattolica)

Abstract

This paper provides an empirical investigation of the impact of innovation on firms' economic performance pinpointing complementarities between product and marketing innovation during the period 1998-2008. Firms' profitability and productivity are simultaneously estimated, thus allowing for consistent and robust estimates of the relationship being tested. The conceptual framework in which we have developed the analysis bridges the gap between the management (organization) approach, from which we grasp the notion of a firm's market orientation to innovation, and the economics of innovation perspective. The results show that being a persistent product-innovating and market- oriented firm significantly affects profitability, although the estimated impact is relatively mild. The gain in productivity determined by investing in R&D is relatively small and in line with the corresponding gain attributable to investing in marketing and organizational innovations. Conversely, capital deepeningÑas measured by the capital-labor ratio-exerts a larger impact on productivity, thus underlining how knowledge capital plays a less relevant role. This result emphasizes a crucial weakness of Italian manufacturing firms, because knowledge in- vestment is the key to future economic growth. The estimates we have presented cover a sufficiently long time interval, thus enabling us to perform different robustness tests.

Suggested Citation

  • Eleonora Bartoloni & Maurizio Baussola, 2015. "Persistent Product Innovation and Market-oriented Behaviour: the Impact on Firms' Performance," DISCE - Quaderni del Dipartimento di Scienze Economiche e Sociali dises1505, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  • Handle: RePEc:ctc:serie2:dises1505
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    File URL: http://dipartimenti.unicatt.it/dises-wp_15_105.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Product Innovation; Market Orientation; European Community Innovation Survey; Profitability; Productivity;

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - 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
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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