Innovation, competition and incentives for R&D

This paper analyses the relationship between past innovation output, competition, and future innovation input in a dynamic econometric setting. We distinguish two dimensions of competition that correspond to the concepts of product substitutability and entry barriers due to fixed costs. Based on firm-level panel data for Germany and Switzerland we obtain consistent results for both countries. Innovation output in t-1 as measured by the sales share of innovative products is positively related to the degree of product obsolescence in t, and negatively to the degree of substitutability in t in both countries. Further, we find that rapid product obsolescence provides positive incentives for higher - primarily product-oriented - R&D investments in t+1, while high substitutability exerts negative incentives for future R&D investment. --Innovation,R&D,Competition

Innovation and Firm Growth over the Business Cycle

This paper investigates how the macroeconomic business cycle impacts the empirical relation between firms’ innovations and their sales growth rates. Based on firm-level panel data over the time period 1995-2014, the paper finds no visible sales growth differentials between firms in booming economic environments. In the economically difficult times of recessions, by contrast, innovative firms show significantly higher sales growth rates than non-innovative firms. This finding is in line with Schumpeter’s (1939) business cycle theory, where recessions play an important role in the adaptation of the economy towards innovative products and processes. Moreover, the paper shows that small innovative firms, profiting from their higher organizational flexibility and stronger entrepreneurial commitment, are the main beneficiaries in this adaption process

ERAWATCH country reports 2011: Switzerland

The main objective of the ERAWATCH Annual Country Reports is to characterise and assess the performance of national research systems and related policies in a structured manner that is comparable across countries. The 2011 country reports assess the evolution on the national R&D investments targets, the efficiency and effectiveness of national policies and investments into R&D, the articulation between education, research and innovation, with an increased focus on the last two in terms of their wider governance and policy mix. The reports for EU MS and AS integrates in the assessment the evolution of the national policy mixes in the perspective of the Europe 2020 Strategy goals and on the realisation and better governance of ERA.JRC.J.2-Knowledge for Growt

Innovation, competition and incentives for R&D

This paper analyses the relationship between past innovation output, competition, and future innovation input in a dynamic econometric setting. We distinguish two dimensions of competition that correspond to the concepts of product substitutability and entry barriers due to fixed costs. Based on firm-level panel data for Germany and Switzerland we obtain consistent results for both countries. Innovation output in t-1 as measured by the sales share of innovative products is positively related to the degree of product obsolescence in t, and negatively to the degree of substitutability in t in both countries. Further, we find that rapid product obsolescence provides positive incentives for higher – primarily product-oriented – R&D investments in t+1, while high substitutability exerts negative incentives for future R&D investment