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Did the Reduction of ICT Investment Due to the 2008 Economic Crisis Affect the Innovation Performance of Firms? An Exploratory Analysis Based on Firm Data for the European Glass, Ceramics, and Cement Industry

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In this paper we investigate empirically, first, the characteristics of the firms that reduced their ICT investment due to the 2008 crisis, particularly the firms? ICT-related characteristics in terms of ICT budget, skills and applications used. The analysis of the ICT characteristics that may influence the likelihood of having reduced ICT investment as a consequence of the crisis is primarily explorative, thus driven by available data and economic intuition. The second research question we examine empirically refers to the possibility that an economic crisis could affect innovation performance through the ICT investment channel. In connection with this, it is also interesting to analyze the ICT characteristics that are associated with ICT-enabled innovation performance. This is the third research question of this paper. Our study is based on firm data from the glass/ceramics/cement industry in six European countries. We find that ICT-related crisis vulnerability correlates positively with decreasing ICT budgets (pro-cyclical investment behaviour), the existence of skill deficits in ICT, the awareness of and interest in novel ICT applications that presumably request much additional ICT investment, the exposure to strong price competition and the strong presence in international markets, in which activities have significantly decreased due to the crisis. Further, statistically significant negative relationship between ICT-enabled product innovation and crisis vulnerability (pro-cyclical behaviour) is found only for new products or services that contain ICT components, and are therefore directly affected by crisis-related decreasing product demand. Employment of specialized ICT personnel, ICT outsourcing (only for process innovation), competition (only for product innovation), and the use of some ICT applications specific to the kind of innovation pursued are ICT characteristics that positively correlate with ICT-enabled innovation.

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File URL: http://dx.doi.org/10.3929/ethz-a-010497771
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Paper provided by KOF Swiss Economic Institute, ETH Zurich in its series KOF Working papers with number 15-391.

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Length: 31 pages
Date of creation: Aug 2015
Handle: RePEc:kof:wpskof:15-391
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  1. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
  2. Filippetti, Andrea & Archibugi, Daniele, 2011. "Innovation in times of crisis: National Systems of Innovation, structure, and demand," Research Policy, Elsevier, vol. 40(2), pages 179-192, March.
  3. Min Ouyang, 2011. "On the Cyclicality of R&D," The Review of Economics and Statistics, MIT Press, vol. 93(2), pages 542-553, May.
  4. Spyros Arvanitis & Martin Woerter, 2014. "Firm characteristics and the cyclicality of R&D investments," Industrial and Corporate Change, Oxford University Press, vol. 23(5), pages 1141-1169.
  5. Gadi Barlevy, 2007. "On the Cyclicality of Research and Development," American Economic Review, American Economic Association, vol. 97(4), pages 1131-1164, September.
  6. Rafferty, Matthew & Funk, Mark, 2004. "The effect of demand shocks on firm-financed R&D," Research in Economics, Elsevier, vol. 58(3), pages 187-203, September.
  7. Rivers, Douglas & Vuong, Quang H., 1988. "Limited information estimators and exogeneity tests for simultaneous probit models," Journal of Econometrics, Elsevier, vol. 39(3), pages 347-366, November.
  8. Gerner, Von Hans-Dieter & Stegmaier, Jen, 2013. "Investitionen in der Krise? Eine empirische Analyse zum Einfluss der Finanz- und Wirtschaftskrise 2008/2009 auf Investitionsanpassungen," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 133(1), pages 67-95.
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