The Link between Firms' Innovation Decision and the Business Cycle: An Empirical Analysis

Heger, Diana

doi:10.2139/ssrn.686712

Abstract

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The Link between Firms' Innovation Decision and the Business Cycle: An Empirical Analysis

Diana Heger

Centre for European Economic Research (ZEW)

2004

ZEW - Centre for European Economic Research Discussion Paper No. 04-085

Abstract:
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.

Number of Pages in PDF File: 32

Keywords: Innovation, Business Cycle, Panel Model, Markov Chains

JEL Classification: C23, C25, D21, L6, O31

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Date posted: April 8, 2005 ; Last revised: August 18, 2008

Suggested Citation

Heger, Diana, The Link between Firms' Innovation Decision and the Business Cycle: An Empirical Analysis (2004). ZEW - Centre for European Economic Research Discussion Paper No. 04-085. Available at SSRN: http://ssrn.com/abstract=686712 or http://dx.doi.org/10.2139/ssrn.686712

Contact Information

Diana Heger (Contact Author)

Centre for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany