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Are different forms of innovation complements or substitutes?

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  • Doran, Justin

Abstract

Purpose – The purpose of this article is to provide an empirical analysis of whether differing forms of innovation act as complements or substitutes in Irish firms’ production functions. Design-Methodology/Approach – The approach adopted by this paper is empirical in nature. Data is obtained for approximately 582 firms from the Irish Community Innovation Survey 2004-06. Four forms of innovation activity are identified; new to firm product, new to market product, process and organisational innovation. Formal tests for complementarity and substitutability are applied to these types of innovation to assess whether they have a complementary effect on firms’ turnover. Findings – The results suggest that there is a substantial degree of complementarity among different forms of innovation. Out of six possible innovation combinations, three are complementary while none exhibit signs of substitutability. Social Implications – From a business perspective, the importance of organisational change to facilitate technological innovation is highlighted while from a policy perspective the importance of the incentivisation of organisation and process innovation is also highlighted. Originality/Value – To date most research has focused on the impact of various forms of innovation, in isolation, on firms’ productivity. They do not consider whether these forms of innovation may in fact be linked, and that by implementing two or more innovations simultaneously, the combined benefits may be greater than the sum of the parts.

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  • Doran, Justin, 2012. "Are different forms of innovation complements or substitutes?," MPRA Paper 44580, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:44580
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    9. Eduardo Strube & Marcelo Resende, 2009. "Complementarity of Innovation Policies in the Brazilian Industry: An Econometric Study," CESifo Working Paper Series 2780, CESifo.
    10. Rosa Jordá-Borrell & Francisca Ruiz-Rodríguez & Reyes González-Relaño, 2015. "Factors and taxonomy of technology purchase (TP) by internationalized innovative companies in peripheral European regions," Papers in Regional Science, Wiley Blackwell, vol. 94, pages 139-174, November.
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    13. Resende, Marcelo & Strube, Eduardo & Zeidan, Rodrigo, 2014. "Complementarity of innovation policies in Brazilian industry: An econometric study," International Journal of Production Economics, Elsevier, vol. 158(C), pages 9-17.
    14. Lewandowska, Małgorzata Stefania & Szymura-Tyc, Maja & Gołębiowski, Tomasz, 2016. "Innovation complementarity, cooperation partners, and new product export: Evidence from Poland," Journal of Business Research, Elsevier, vol. 69(9), pages 3673-3681.
    15. Arranz, N. & Arroyabe, M.F. & Li, Jun & de Arroyabe, J.C. Fernandez, 2019. "An integrated model of organisational innovation and firm performance: Generation, persistence and complementarity," Journal of Business Research, Elsevier, vol. 105(C), pages 270-282.
    16. Alfonso Expósito & Juan A. Sanchis-Llopis, 2018. "The effects of innovation on the decisions of exporting and/or importing in SMEs: empirical evidence in the case of Spain," Working Papers 1814, Department of Applied Economics II, Universidad de Valencia.
    17. Tomasz Gołębiowski & Małgorzata Stefania Lewandowska & Małgorzata Rószkiewicz, 2019. "Subsidiaries’ dual embeddedness and innovation-related competitive advantage," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 3, pages 5-30.
    18. Luca Pennacchio & Giuseppe Piroli & Otello Ardovino, 2018. "The Role of R&D Cooperation in Firm Innovation," International Journal of Innovation and Technology Management (IJITM), World Scientific Publishing Co. Pte. Ltd., vol. 15(01), pages 1-27, February.
    19. Lee, Ryeowon & Lee, Jong-Ho & Garrett, Tony C., 2019. "Synergy effects of innovation on firm performance," Journal of Business Research, Elsevier, vol. 99(C), pages 507-515.
    20. Bodlaj, Mateja & Kadic-Maglajlic, Selma & Vida, Irena, 2020. "Disentangling the impact of different innovation types, financial constraints and geographic diversification on SMEs' export growth," Journal of Business Research, Elsevier, vol. 108(C), pages 466-475.

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    More about this item

    Keywords

    Innovation; Productivity; Complementarity; Substitutability;
    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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