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Innovation Complementarity and Scale of Production

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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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    References listed on IDEAS

    as
    1. Mohnen, Pierre & Roller, Lars-Hendrik, 2005. "Complementarities in innovation policy," European Economic Review, Elsevier, vol. 49(6), pages 1431-1450, August.
    2. Athey, Susan. & Stern, Scott, 1969-, 1998. "An empirical framework for testing theories about complementarity in orgaziational design," Working papers WP 4022-98., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    3. Kaiser, Ulrich, 2003. "Strategic complementarities between different types of ICT-expenditures," ZEW Discussion Papers 03-46, ZEW - Leibniz Centre for European Economic Research.
    4. Susan Athey & Scott Stern, 1998. "An Empirical Framework for Testing Theories About Complimentarity in Organizational Design," NBER Working Papers 6600, National Bureau of Economic Research, Inc.
    5. 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.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    complementarity; supermodularity; non-observed heterogeneity; product innovation; process innovation;
    All these keywords.

    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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