Do External Knowledge Spillovers Induce Firms' Innovations? Evidence from Slovenia

LICOS Discussion Paper No. 156/2005

37 Pages Posted: 8 Feb 2006

See all articles by Jože P. Damijan

Jože P. Damijan

University of Ljubljana, Slovenia - Department of International Economics

Andreja Jaklic

University of Ljubljana - Faculty of Economics

Matija Rojec

University of Ljubljana - Faculty of Social Sciences

Date Written: February 2006

Abstract

The paper analyses whether, and to what extent, firm's ability to innovate is induced by firm's own R&D activity and to what extent by factors external to firm. It first estimates the impact of firms' internal R&D capital and external R&D spillovers on firms' innovation activity within an integrated dynamic model. In the second step, we then estimate the impact of firms' innovations on firms' productivity growth. Using the firm level data on innovation activity combined with firms' financial data for a large sample of Slovenian firms in the period 1996-2002, the paper produces three main findings. First, firm's own R&D expenditures as well as external knowledge spillovers, such as national and international public R&D subsidies, foreign ownership and intra-sector innovation spillovers do enhance firm's ability to innovate. Second, innovations as a result of firm's R&D do contribute substantially to firm's total factor productivity growth. And third, foreign ownership has a double impact on firm's TFP growth - it first enhances firm's ability to innovate and then it additionally contributes to firm's TFP growth via superior organization techniques and other channels of knowledge diffusion.

Keywords: innovation, external knowledge spillovers, FDI, Slovenia

JEL Classification: D24, F14, F21

Suggested Citation

Damijan, Joze P. and Jaklic, Andreja and Rojec, Matija, Do External Knowledge Spillovers Induce Firms' Innovations? Evidence from Slovenia (February 2006). LICOS Discussion Paper No. 156/2005. Available at SSRN: https://ssrn.com/abstract=881522 or http://dx.doi.org/10.2139/ssrn.881522

Joze P. Damijan

University of Ljubljana, Slovenia - Department of International Economics ( email )

Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia
+386 61 189 24 00 (Phone)
+386 61 189 26 98 (Fax)

Andreja Jaklic

University of Ljubljana - Faculty of Economics ( email )

Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia

Matija Rojec (Contact Author)

University of Ljubljana - Faculty of Social Sciences ( email )

Kardeljeva ploscad 5
Ljubljana, 1000
Slovenia

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