Disentangling the effects of process and product innovation on cost and demand

J. Jaumandreu*, J. Mairesse

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review


We explore in this note different structural models of the impact of process and product innovation on firms' demand and production cost functions. We find that the introduction of process and product innovations affects them differently as could be expected. Both product and process innovation shift forward the demand for the products of the firm. Process innovation reduces production marginal cost, but not always. A possibility, that we cannot prove or reject with the current specification of our models and available data, is that process innovation associated with product innovation raise marginal cost. Interestingly, we also find that advertising significantly augments demand but does not affect production marginal cost. To obtain broader conclusions, richer data will be needed allowing an enlargement of the model, in which process and product innovations could be specified distinctively and well identified. © 2016 Informa UK Limited, trading as Taylor & Francis Group
Original languageEnglish
Pages (from-to)150-167
Number of pages18
JournalEconomics of Innovation and New Technology
Issue number1-2
Early online date2016
Publication statusPublished - 2017

JEL classifications

  • o33 - "Technological Change: Choices and Consequences; Diffusion Processes"
  • o32 - Management of Technological Innovation and R&D


  • process innovation
  • Product innovation
  • R&D
  • innovation
  • process

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