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On the dynamics of product and process innovations: A bivariate random effects probit model

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  • Flaig, Gebhard
  • Stadler, Manfred

Abstract

Based on a stochastic dynamic model of a firm's optimal innovative behavior we derive a simultaneous equation system for product and process innovations with intertemporal spillover effects. We estimate various versions of the model with dichotomous Innovation data at the firm level by using a bivariate dynamic random effects probit model. The data set, provided by the Ifo-Institute, covers the period between 1981 and 1989 and includes 586 firms of the West German manufacturing sector. It turns out that a firm's probabilities of product and process innovations depend positively on dynamic spillover effects even if one controls for firm size, market concentration, demand expectations, labor cost, unobserved heterogeneity and potential endogeneity of the explanatory variables.

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  • Flaig, Gebhard & Stadler, Manfred, 1996. "On the dynamics of product and process innovations: A bivariate random effects probit model," Tübinger Diskussionsbeiträge 64, University of Tübingen, School of Business and Economics.
  • Handle: RePEc:zbw:tuedps:64
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    References listed on IDEAS

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    1. Jeffrey I. Bernstein & M. Ishaq Nadiri, 1989. "Research and Development and Intra-industry Spillovers: An Empirical Application of Dynamic Duality," Review of Economic Studies, Oxford University Press, vol. 56(2), pages 249-267.
    2. Cohen, Wesley M. & Levin, Richard C., 1989. "Empirical studies of innovation and market structure," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 18, pages 1059-1107, Elsevier.
    3. Gerosky, P A & Pomroy, R, 1990. "Innovation and the Evolution of Market Structure," Journal of Industrial Economics, Wiley Blackwell, vol. 38(3), pages 299-314, March.
    4. Pohlmeier, Winfried, 1992. "On the Simultaneity of Innovations and Market Structure," Empirical Economics, Springer, vol. 17(2), pages 253-272.
    5. König, Heinz & Laisney, François & Lechner, Michael & Pohlmeier, Winfried, 1993. "On the dynamics of process innovative activity: an empirical investigation using panel data," ZEW Discussion Papers 93-08, ZEW - Leibniz Centre for European Economic Research.
    6. Kamien,Morton I. & Schwartz,Nancy L., 1982. "Market Structure and Innovation," Cambridge Books, Cambridge University Press, number 9780521293853, December.
    7. Laisney, Francois & Lechner, Michael & Pohlmeier, Winfried, 1992. "Innovation activity and firm heterogeneity: Empirical evidence from West Germany," Structural Change and Economic Dynamics, Elsevier, vol. 3(2), pages 301-320, December.
    8. Zoltan Acs & David Audretsch, 1990. "Innovation and Small Firms," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262011131, August.
    9. Geroski, P A, 1990. "Innovation, Technological Opportunity, and Market Structure," Oxford Economic Papers, Oxford University Press, vol. 42(3), pages 586-602, July.
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    Cited by:

    1. Smolny, Werner, 1997. "Endogenous innovations in a model of the firm: Theory and empirical application for West-German manufacturing firms," Discussion Papers 39, University of Konstanz, Center for International Labor Economics (CILE).

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