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What Determines Firms’ Innovation in Eastern Europe and Central Asia

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  • Afandi, Elvin
  • Kermani, Majid

Abstract

By employing a rich sample of firm-level data in seven Eastern Europe and Central Asian countries from Europe and Central Asia, our paper investigates core as well as some specific determinants of firm innovation. We find that the likelihood of engaging in innovation for a firm increases with its core socio-economic characteristics such as size, age, capacity utilization, domestic competition and foreign ownership. In addition to the estimates of these socio-economic covariates, the ultimate purpose of our study is to obtain more in-depth knowledge about the policy implacable factors for firm innovation that the countries could focus on. These policy-related factors are: (i) access to finance, (ii) human capital, and (iii) foreign trade. In this respect, our study finds that firm’s innovation increases with better financial inclusion, greater human capital and engagement in foreign trade. We argue that these analysis and results, coupled with inclusive and targeted policies, can be used to enrich the process of private sector innovation in the region’s countries.

Suggested Citation

  • Afandi, Elvin & Kermani, Majid, 2013. "What Determines Firms’ Innovation in Eastern Europe and Central Asia," MPRA Paper 53255, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:53255
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    References listed on IDEAS

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    1. repec:hrv:faseco:33077889 is not listed on IDEAS
    2. Philippe Aghion & Nick Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2005. "Competition and Innovation: an Inverted-U Relationship," The Quarterly Journal of Economics, Oxford University Press, vol. 120(2), pages 701-728.
    3. Ross Levine & Norman Loayza & Thorsten Beck, 2002. "Financial Intermediation and Growth: Causality and Causes," Central Banking, Analysis, and Economic Policies Book Series,in: Leonardo Hernández & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.), Banking, Financial Integration, and International Crises, edition 1, volume 3, chapter 2, pages 031-084 Central Bank of Chile.
    4. Andrei Shleifer, 1998. "State versus Private Ownership," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 133-150, Fall.
    5. Rita Almeida & Ana Margarida Fernandes, 2008. "Openness and Technological Innovations in Developing Countries: Evidence from Firm-Level Surveys," Journal of Development Studies, Taylor & Francis Journals, vol. 44(5), pages 701-727.
    6. Filipe Silva & Carlos Carreira, 2016. "The Role of Financial Constraints in the Services Sector: How Different is it from Manufacturing?," Notas Económicas, Faculty of Economics, University of Coimbra, issue 43, pages 21-41, June.
    7. Francesco Bogliacino & Sebastian Gómez Cardona, 2010. "The determinants of R&D Investment: the role of Cash flow and Capabilities," JRC Working Papers on Corporate R&D and Innovation 2010-10, Joint Research Centre (Seville site).
    8. John Sutton, 2007. "Quality, Trade and the Moving Window: The Globalisation Process," Economic Journal, Royal Economic Society, vol. 117(524), pages 469-498, November.
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    More about this item

    Keywords

    Firm innovation; access to finance; human capital; foreign trade;

    JEL classification:

    • G0 - Financial Economics - - General
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • P33 - Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid

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