Openness and Innovation - Home and Export Demand Effects on Manufacturing Innovation: Panel Data Evidence for Ireland and Switzerland

KOF Working Paper No. 210

31 Pages Posted: 27 Nov 2008

See all articles by Martin Woerter

Martin Woerter

Swiss Federal Institute of Technology Zurich (ETH) - Swiss Institute for Business Cycle Research (KOF)

Stephen Roper

University of Warwick - Centre for Small and Medium Enterprises

Date Written: November 1, 2008

Abstract

Recent studies in the tradition of Schmookler have re-emphasised the potential role of demand in stimulating innovation. Here, we reconsider the role of 'home' and 'export' market demand in stimulating manufacturing innovation using comparable panel data for two small open economies - Ireland and Switzerland. Our analysis is based on the estimation of reduced form innovation production functions using panel data estimators over the sample period 1994 to 2005. For a range of innovation indicators, however, we find little evidence of any significant market demand effects, with innovation performance instead determined largely by firm-level capability effects and characteristics. In policy and strategy terms this suggests the continued value of measures to improve innovation capability regardless of market demand conditions. In more methodological terms our results suggest the validity of the usual assumption implicit in modelling innovation outputs that supply-side factors predominate.

Keywords: Innovation, demand, Ireland, Switzerland

JEL Classification: O3, O5, P5

Suggested Citation

Woerter, Martin and Roper, Stephen, Openness and Innovation - Home and Export Demand Effects on Manufacturing Innovation: Panel Data Evidence for Ireland and Switzerland (November 1, 2008). KOF Working Paper No. 210, Available at SSRN: https://ssrn.com/abstract=1307602 or http://dx.doi.org/10.2139/ssrn.1307602

Martin Woerter (Contact Author)

Swiss Federal Institute of Technology Zurich (ETH) - Swiss Institute for Business Cycle Research (KOF) ( email )

CH-8092 Zurich
Switzerland

Stephen Roper

University of Warwick - Centre for Small and Medium Enterprises ( email )

Coventry
United Kingdom

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