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Innovation Complementarity and Scale of Production

Author

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  • Miravete, Eugenio J.
  • Pernias, 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.
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Suggested Citation

  • Miravete, Eugenio J. & Pernias, Jose C., 1998. "Innovation Complementarity and Scale of Production," Working Papers 98-42, C.V. Starr Center for Applied Economics, New York University.
    • Handle: RePEc:cvs:starer:98-42
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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. Tobias Kretschmer & Eugenio J. Miravete & Jose C. Pernias, 2012. "Competitive Pressure and the Adoption of Complementary Innovations," American Economic Review, American Economic Association, vol. 102(4), pages 1540-1570, June.
    3. 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, vol. 20(6), pages 775-799, June.
    4. 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.
    5. Stephen Roper & Jan Youtie & Philip Shapira & Andrea Fernandez-Ribas, 2010. "Knowledge, Capabilities and Manufacturing Innovation: A USA-Europe Comparison," Regional Studies, Taylor & Francis Journals, vol. 44(3), pages 253-279.
    6. Mohnen, Pierre & Roller, Lars-Hendrik, 2005. "Complementarities in innovation policy," European Economic Review, Elsevier, vol. 49(6), pages 1431-1450, August.
    7. José M. Labeaga & Ester Martínez Ros, "undated". "Persistence and ability in the innovation decisions," Working Papers 2005-16, FEDEA.
    8. Hottenrott, Hanna & Rexhäuser, Sascha & Veugelers, Reinhilde, 2012. "Green innovations and organisational change: making better use of environmental technology," CEPR Discussion Papers 9055, C.E.P.R. Discussion Papers.
    9. 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.
    10. Mairesse, Jacques & Mohnen, Pierre, 2010. "Using Innovation Surveys for Econometric Analysis," Handbook of the Economics of Innovation, Elsevier.
    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. Eugenio J. Miravete, 2009. "Competing with Menus of Tariff Options," Journal of the European Economic Association, MIT Press, vol. 7(1), pages 188-205, March.
    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. 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.
    20. 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; supermodularity; non-observed heterogeneity; product innovation; process innovation;

    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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