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The Link Between Firms? Innovation Decision and the Business Cycle: An Empirical Analysis

  • Heger, Diana

The sensitivity of innovation activities with respect to the business cycle is often assumed to be small. In this paper the hypothesis on cyclical dependence of innovation activities is tested for firms in the German manufacturing, and additionally for SMEs. To this end firms? innovation decisions are considered. The decision to innovate in one period is modelled via a first-order Markov chain approach. The results suggest that the patterns in innovative behavior are linked to the business cycle.

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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 04-85.

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Date of creation: 2004
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Handle: RePEc:zbw:zewdip:2889
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  1. Geroski, Paul A & Samiei, Hossein & Van Reenen, John, 1996. "How Persistently do Firms Innovate?," CEPR Discussion Papers 1433, C.E.P.R. Discussion Papers.
  2. Caballero, Ricardo J & Hammour, Mohamad L, 1994. "The Cleansing Effect of Recessions," American Economic Review, American Economic Association, vol. 84(5), pages 1350-68, December.
  3. Boyan Jovanovic & Saul Lach, 1995. "Product innovation and the business cycle," Finance and Economics Discussion Series 95-46, Board of Governors of the Federal Reserve System (U.S.).
  4. Czarnitzki, Dirk & Kraft, Kornelius, 2000. "An empirical test of the asymmetric models on innovative activity: who invests more into R&D - the incumbent or the challenger?," ZEW Discussion Papers 00-10, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  5. Mervyn A. King & Mark Robson, 1989. "Endogenous Growth and the role of History," NBER Working Papers 3151, National Bureau of Economic Research, Inc.
  6. Andrew B. Bernard & Joachim Wagner, 1998. "Export Entry and Exit by German Firms," NBER Working Papers 6538, National Bureau of Economic Research, Inc.
  7. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626 National Bureau of Economic Research, Inc.
  8. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, June.
  9. Phu NGUYEN VAN & Ulrich KAISER & François LAISNEY, 2001. "The Performance of German Firms in the Business-Related Service Sectors: A Dynamic Analysis," Working Papers of BETA 2001-16, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  10. Shleifer, Andrei, 1986. "Implementation Cycles," Journal of Political Economy, University of Chicago Press, vol. 94(6), pages 1163-90, December.
  11. Edward C. Prescott, 1986. "Theory ahead of business cycle measurement," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 9-22.
  12. Kleinknecht, Alfred, 1990. "Are There Schumpeterian Waves of Innovations?," Cambridge Journal of Economics, Oxford University Press, vol. 14(1), pages 81-92, March.
  13. Kleinknecht, Alfred & Verspagen, Bart, 1990. "Demand and innovation: Schmookler re-examined," Research Policy, Elsevier, vol. 19(4), pages 387-394, August.
  14. Cefis, Elena, 2003. "Is there persistence in innovative activities?," International Journal of Industrial Organization, Elsevier, vol. 21(4), pages 489-515, April.
  15. Geroski, P A & Walters, C F, 1995. "Innovative Activity over the Business Cycle," Economic Journal, Royal Economic Society, vol. 105(431), pages 916-28, July.
  16. repec:cup:macdyn:v:2:y:1998:i:3:p:322-44 is not listed on IDEAS
  17. Saint-Paul, Gilles, 1992. "Productivity Growth and the Structure of the Business Cycle," CEPR Discussion Papers 709, C.E.P.R. Discussion Papers.
  18. Werner Smolny, 2003. "Determinants of innovation behaviour and investment estimates for west-german manufacturing firms," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 12(5), pages 449-463.
  19. Utterback, James M & Abernathy, William J, 1975. "A dynamic model of process and product innovation," Omega, Elsevier, vol. 3(6), pages 639-656, December.
  20. Judd, Kenneth L, 1985. "On the Performance of Patents," Econometrica, Econometric Society, vol. 53(3), pages 567-85, May.
  21. Fryges, Helmut, 2004. "Stepping In and Out of the International Market: Internationalisation of Technology-Oriented Firms in Germany and the UK," ZEW Discussion Papers 04-65, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  22. Aghion, Philippe & Saint-Paul, Gilles, 1998. "VIRTUES OF BAD TIMES Interaction Between Productivity Growth and Economic Fluctuations," Macroeconomic Dynamics, Cambridge University Press, vol. 2(03), pages 322-344, September.
  23. Brouwer, Erik & Kleinknecht, Alfred, 1997. "Keynes-plus? Effective demand and changes in firm-level R&D: an empirical note," Serie Research Memoranda 0038, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  24. R. M. Cyert & H. J. Davidson & G. L. Thompson, 1962. "Estimation of the Allowance for Doubtful Accounts by Markov Chains," Management Science, INFORMS, vol. 8(3), pages 287-303, April.
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