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Is Demand-Pulled Innovation Equally Important in Different Groups of Firms?

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  • Piva, Mariacristina

    (Università Cattolica del Sacro Cuore)

  • Vivarelli, Marco

    (Università Cattolica del Sacro Cuore)

Abstract

Previous empirical literature - mainly cross-sectional - has tested the demand-pull hypothesis and found that overall, evidence does not conflict with the idea that innovation may be driven by output. Using a balanced panel of 216 Italian manufacturing firms over the 1995-2000 period, and checking for fixed effects, time, sectoral and size dummies and for the path-dependent nature of R&D, we also find a (barely significant) role of sales in inducing R&D expenditures. However, at the micro level, the demand-pull effect plays a varying role for the different sub-samples of firms. In particular, exporting firms, those which are liquidity-constrained, those not receiving public subsidies and those not heading a business group, seem to be particularly sensitive to sales in deciding their R&D expenditures. These microeconometric results have been obtained using a Least Squares Dummy Variable Corrected (LSDVC) estimator, a recently-proposed panel data technique particularly suitable for small samples.

Suggested Citation

  • Piva, Mariacristina & Vivarelli, Marco, 2006. "Is Demand-Pulled Innovation Equally Important in Different Groups of Firms?," IZA Discussion Papers 1982, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp1982
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    More about this item

    Keywords

    LSDVC estimator; R&D expenditures; demand-pull; innovative firms;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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