Reviving Demand-Pull Perspectives: The Effect of Demand Uncertainty and Stagnancy on R&D Strategy.

44 Pages Posted: 7 Mar 2016 Last revised: 30 Sep 2016

See all articles by Jose Garcia-Quevedo

Jose Garcia-Quevedo

Barcelona Institute of Economics (IEB); University of Barcelona - Faculty of Economic Science and Business Studies

Gabriele Pellegrino

Ecole Polytechnique Fédérale de Lausanne

Maria Savona

University of Sussex

Multiple version iconThere are 2 versions of this paper

Date Written: May 28, 2014

Abstract

This paper looks at the effects of demand uncertainty and stagnancy on firms’ decisions to engage in R&D activities and the amount of financial effort devoted to such activities. In so doing, the paper makes a number of contributions to the innovation literature: first, it adds to the recently revived debate on demand-pull perspectives in innovation studies by examining demand-related (lack of) incentives to invest in innovation. Second, it complements the emerging literature on barriers to innovation by focusing on demand-related obstacles rather than on the more frequently explored financial barriers. Third, it analyses whether experiencing uncertainty or lack of demand is a sector-specific feature. Firms active in high- or low-tech manufacturing or in knowledge intensive or low-tech services might be more or less dependent on demand conditions when deciding to perform R&D. We find that uncertain demand and lack of demand are perceived as two quite distinct barriers. While demand uncertainty does not seem to constrain R&D efforts, the perception of a lack of demand has a marked impact on not only the amount of investment in R&D but also the likelihood of firms engaging in R&D activities. We interpret this evidence in terms of the specific phase in the innovation cycle in which decisions to invest in R&D are taken. Sectoral affiliation does not seem to be a factor in demand conditions, supporting the conjecture that positive expectations regarding market demand are structural and necessary conditions that have to be satisfied for all firms prior to their investing in R&D.

Suggested Citation

Garcia-Quevedo, Jose and Pellegrino, Gabriele and Savona, Maria, Reviving Demand-Pull Perspectives: The Effect of Demand Uncertainty and Stagnancy on R&D Strategy. (May 28, 2014). SWPS 2014-09. Available at SSRN: https://ssrn.com/abstract=2742123 or http://dx.doi.org/10.2139/ssrn.2742123

Jose Garcia-Quevedo (Contact Author)

Barcelona Institute of Economics (IEB) ( email )

Av. Diagonal 690
Barcelona, E-08034
Spain

University of Barcelona - Faculty of Economic Science and Business Studies ( email )

Barcelona
Spain

Gabriele Pellegrino

Ecole Polytechnique Fédérale de Lausanne ( email )

Station 5
Odyssea 1.04
1015 Lausanne, CH-1015
Switzerland

Maria Savona

University of Sussex ( email )

Sussex House
Falmer
Brighton, Sussex BNI 9RH
United Kingdom

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