Determinants and impact of design on innovation in firms in France

This study examines the impact of design activities on innovation and identifies the main determinants influencing firms’ investment in design. We use a cross-sectional database built from three sources: the French Community Innovation Survey (CIS) 2018, the Annual Declaration of Social Data (DADS), and the structural business statistics (FARE) for the period 2015–2017. By adopting an instrumental variable (IV) approach that accounts for the endogeneity of design, our results provide clear evidence that integrating design significantly increases the likelihood of innovation. A doubling of the number of designers within a firm more than doubles the probability of innovating in product or process. This impact of design is greater than that of R&D or marketing, indicating its central role in the innovation process. However, failing to consider the endogeneity of design leads to an underestimation of its true effect. Similarly, our results confirm the endogeneity of R&D, as demonstrated by Crépon et al. (1998), and ignoring this dimension also results in an underestimation of its impact on innovation. Regarding the determinants of design, we find that the concentration of designers within a sector and a region, public financial support, and export intensity foster its adoption. By introducing a time lag between innovation activities and their outcomes, certain limitations of cross-sectional studies—particularly simultaneity bias—are overcome, despite the use of the IV approach.