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Innovation and demand in industry dynamics

Author

Listed:
  • Francesco Bogliacino

    (European Commission)

  • Mario Pianta

    (Department of Economics, Università di Urbino "Carlo Bo")

Abstract

The links between three interconnected elements of the Schumpeterian sources of economic change are explored, conceptually and empirically, in this paper: the commitment of industries to invest profits in cumulative R&D efforts; the ability of industries? R&D to lead to successful innovations; the impact of new products and processes on high entrepreneurial profits. We consider the nature and variety of innovative efforts ? distinguishing in particular between strategies of technological and cost competiveness ? and we introduce the role of demand in pulling technological change and supporting profits. We develop a simultaneous three-equation model and we test it at industry level ? for 38 manufacturing and service sectors ? on eight European countries over two time periods from 1994 to 2006. The results show that the model effectively accounts for the dynamics of European industries and highlights the interconnections between the different factors contributing to growth.

Suggested Citation

  • Francesco Bogliacino & Mario Pianta, 2011. "Innovation and demand in industry dynamics," Working Papers 1101, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2011.
    • Handle: RePEc:urb:wpaper:11_01
    as

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    File URL: http://www.econ.uniurb.it/RePEc/urb/wpaper/WP_11_01.pdf
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    References listed on IDEAS

    as
    1. James R. Brown & Steven M. Fazzari & Bruce C. Petersen, 2009. "Financing Innovation and Growth: Cash Flow, External Equity, and the 1990s R&D Boom," Journal of Finance, American Finance Association, vol. 64(1), pages 151-185, February.
    2. Penrose, Edith, 2009. "The Theory of the Growth of the Firm," OUP Catalogue, Oxford University Press, edition 4, number 9780199573844.
    3. Pitelis, Christos (ed.), 2002. "The Growth of the Firm: The Legacy of Edith Penrose," OUP Catalogue, Oxford University Press, number 9780199248520.
    4. Francesco Bogliacino & Mario Pianta, 2009. "The impact of innovation on labour productivity growth in European industries: Does it depend on firms' competitiveness strategies?," JRC Working Papers on Corporate R&D and Innovation 2009-13, Joint Research Centre.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    R&D; Innovation; Profits; Demand; System Three Stages Least Squares.;
    All these keywords.

    JEL classification:

    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • L8 - Industrial Organization - - Industry Studies: Services
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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