The role of demand in fostering product vs process innovation: a model and an empirical test

H. Dawid, G. Pellegrino, M. Vivarelli*

*Corresponding author for this work

    Research output: Contribution to journalArticleAcademicpeer-review

    3 Citations (Web of Science)

    Abstract

    While the extant innovation literature has provided extensive evidence of the so-called "demand-pull" effect, the possible diverse impact of demand evolution on product vs process innovation activities has not been yet investigated. This paper develops a formal model predicting a larger inducing impact of past sales in fostering product rather than process innovation. This prediction is then tested through a dynamic microeconometric model, controlling for R&D persistence, sample selection, observed and unobservable individual firm effects and time and sectoral peculiarities. Results are consistent with the model and suggest that an expansionary economic policy may benefit the diffusion of new products or even the emergence of entire new sectors.

    Original languageEnglish
    Pages (from-to)1553-1572
    Number of pages20
    JournalJournal of Evolutionary Economics
    Volume31
    Issue number5
    Early online date18 Jul 2020
    DOIs
    Publication statusPublished - Nov 2021

    JEL classifications

    • o32 - Management of Technological Innovation and R&D
    • o31 - Innovation and Invention: Processes and Incentives

    Keywords

    • Demand-pull innovation
    • Dynamic two tobit
    • R&D
    • Technological change
    • PULL
    • IMPACT
    • RESEARCH-AND-DEVELOPMENT
    • FIRM SIZE
    • INCENTIVES
    • TECHNOLOGY-PUSH

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