Is Demand-Pulled Innovation Equally Important in Different Groups of Firms?

31 Pages Posted: 2 Mar 2006

See all articles by Mariacristina Piva

Mariacristina Piva

Universita Cattolica del Sacro Cuore

Marco Vivarelli

Universita Cattolica del Sacro Cuore, Milano; IZA Institute of Labor Economics

Multiple version iconThere are 2 versions of this paper

Date Written: February 2006

Abstract

Previous empirical literature - mainly cross-sectional - has tested the demand-pull hypothesis and found that overall, evidence does not conflict with the idea that innovation may be driven by output. Using a balanced panel of 216 Italian manufacturing firms over the 1995-2000 period, and checking for fixed effects, time, sectoral and size dummies and for the pathdependent nature of R&D, we also find a (barely significant) role of sales in inducing R&D expenditures. However, at the micro level, the demand-pull effect plays a varying role for the different sub-samples of firms. In particular, exporting firms, those which are liquidity constrained, those not receiving public subsidies and those not heading a business group, seem to be particularly sensitive to sales in deciding their R&D expenditures. These microeconometric results have been obtained using a Least Squares Dummy Variable Corrected (LSDVC) estimator, a recently-proposed panel data technique particularly suitable for small samples.

Keywords: R&D expenditures, demand-pull, innovative firms, LSDVC estimator

JEL Classification: O31

Suggested Citation

Piva, Mariacristina and Vivarelli, Marco, Is Demand-Pulled Innovation Equally Important in Different Groups of Firms? (February 2006). IZA Discussion Paper No. 1982. Available at SSRN: https://ssrn.com/abstract=887752

Mariacristina Piva

Universita Cattolica del Sacro Cuore ( email )

Via Emilia Parmense, 84
Piacenza
Italy

Marco Vivarelli (Contact Author)

Universita Cattolica del Sacro Cuore, Milano ( email )

Largo Gemelli 1
Milano, 20123
Italy

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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