The Innovation Threshold

TILEC Discussion Paper No. 2007-008

28 Pages Posted: 15 Feb 2007

See all articles by Erik Brouwer

Erik Brouwer

Tilburg Law and Economics Center (TILEC)

Tom Poot

affiliation not provided to SSRN

Kees van Montfort

Nyenrode University

Date Written: February 2007

Abstract

In this paper, we propose an economic model to analyse the sales out of new products. This model accounts for the fact that even among firms for which R&D is a permanent activity, a fraction of firms does not have sales of innovative products during a two-year observation period. We propose a model in which the fixed costs of introduction is a major concern in the decision making process. In a structural model we estimate the fixed costs of the market introduction of new products and explain subsequent sales of innovative products. We examine a indicator of innovative output, i.e. sales of products 'new to the firm'. We estimate fixed costs thresholds using data from the Dutch part of the Community Innovation Survey (CIS) from 1998. R&D intensity, competition and market structure have a positive impact on sales of new products. The most important factors to decrease the fixed costs threshold of introduction are product related R&D investments, R&D subsidies and knowledge spillovers.

Keywords: Innovation, Product R&D, Threshold model

JEL Classification: C51, L23, O30

Suggested Citation

Brouwer, Erik and Poot, Tom and van Montfort, Kees, The Innovation Threshold (February 2007). TILEC Discussion Paper No. 2007-008, Available at SSRN: https://ssrn.com/abstract=963114 or http://dx.doi.org/10.2139/ssrn.963114

Erik Brouwer (Contact Author)

Tilburg Law and Economics Center (TILEC) ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

Tom Poot

affiliation not provided to SSRN

No Address Available

Kees Van Montfort

Nyenrode University ( email )

3621 BG Breukelen
Netherlands

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