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The Roles of R&D and networking for innovation by Irish and foreign-owned firms: evidence from the Irish CIS 2006-08

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  • Doran, Justin
  • O'Leary, Eoin

Abstract

This paper provides an empirical test of Cohen and Levinthal’s (1990) hypothesis that undertaking R&D and collaborating with external networks together enhance the probability that firms engage in product and process innovation. Following Doran, Jordan and O’Leary (2013) we test this hypothesis separately for Irish and foreign-owned firms based in Ireland using data from the Irish Community Innovation Survey 2006-08. In order to control for potential endogeneity of the external networking variables a two-step procedure is used with predicted probabilities used as instruments in the estimated production functions. The results suggest that Irish-owned firms which engage in external networks with public knowledge sources while simultaneously undertaking R&D are more likely to innovate than firms which perform these two activities individually. However, Irish-owned firms which engage in backward networking for product and forward networking for process innovation while also undertaking R&D are less likely to be innovative, perhaps suggesting a substitution effect. These results for Irish-owned firms provide some support for Cohen and Levinthal’s (1990) hypothesis. However, foreign-owned firms seems to be largely self-contained, relying exclusively on intramural R&D for innovation as the external networking variables, both individually and when interacted with R&D, have no effect on innovation likelihood.

Suggested Citation

  • Doran, Justin & O'Leary, Eoin, 2013. "The Roles of R&D and networking for innovation by Irish and foreign-owned firms: evidence from the Irish CIS 2006-08," MPRA Paper 47291, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:47291
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    File URL: https://mpra.ub.uni-muenchen.de/47291/1/MPRA_paper_47291.pdf
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    References listed on IDEAS

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    1. James R. Hines, 2010. "Treasure Islands," Journal of Economic Perspectives, American Economic Association, vol. 24(4), pages 103-126, Fall.
    2. Doran, Justin & Jordan, Declan & O'Leary, Eoin, 2013. "Effects of R&D spending on Innovation by Irish and Foreign-owned Businesses," MPRA Paper 44579, University Library of Munich, Germany.
    3. Barry, Frank & Bradley, John, 1997. "FDI and Trade: The Irish Host-Country Experience," Economic Journal, Royal Economic Society, vol. 107(445), pages 1798-1811, November.
    4. Crepon, B. & Duguet, E. & Mairesse, J., 1998. "Research Investment, Innovation and Productivity: An Econometric Analysis at the Firm Level," Papiers d'Economie Mathématique et Applications 98.15, Université Panthéon-Sorbonne (Paris 1).
    5. Justin Doran & Declan Jordan & Eoin O'Leary, 2012. "The Effects of National and International Interaction on Innovation: Evidence from the Irish CIS: 2004--06," Industry and Innovation, Taylor & Francis Journals, vol. 19(5), pages 371-390, July.
    6. Rachel Griffith & Elena Huergo & Jacques Mairesse & Bettina Peters, 2006. "Innovation and Productivity Across Four European Countries," Oxford Review of Economic Policy, Oxford University Press, vol. 22(4), pages 483-498, Winter.
    7. Peters, Bettina & Lööf, Hans & Janz, Norbert, 2003. "Firm Level Innovation and Productivity: Is there a Common Story Across Countries?," ZEW Discussion Papers 03-26, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    8. David, Paul A. & Hall, Bronwyn H. & Toole, Andrew A., 2000. "Is public R&D a complement or substitute for private R&D? A review of the econometric evidence," Research Policy, Elsevier, vol. 29(4-5), pages 497-529, April.
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    11. Justin Doran & Eoin O'Leary, 2011. "External Interaction, Innovation and Productivity: An Application of the Innovation Value Chain to Ireland," Spatial Economic Analysis, Taylor & Francis Journals, vol. 6(2), pages 199-222.
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    More about this item

    Keywords

    Innovation; R&D; External Networking;

    JEL classification:

    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • 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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