Abstract
This paper looks at the effects of demand uncertainty and stagnancy on firms’ decisions to engage in RD second, by analyzing in detail whether experiencing uncertainty or lack of demand is a sector-specific feature, namely whether firms active in high or low tech manufacturing or in knowledge intensive or low tech services are more or less dependent on demand conditions when deciding to perform R&D. We find that uncertain demand and lack of demand are perceived as two completely different barriers. While uncertainty on demand does not seem to constrain R&D efforts, the perception of lack of demand does strongly reduce not only the amount of investment in R&D but also the likelihood of firms to engage in R&D activities. We interpret this evidence in terms of the specific phase of the innovation cycle in which decisions to invest in R&D are taken. Sectoral affiliation does not seem to matter when it relates to demand conditions, supporting the conjecture that positive expectations on market demand is a structural and necessary condition to be fulfilled for all firms prior to invest in R&D.
Highlights
The closely connected influences of demand and technological opportunities on the strategic decisions of firms to innovate and the aggregate outcomes of these decisions are well established subjects of research in innovation studies, since the seminal contribution of Schmookler (1966)
Following the classification proposed by Eurostat and based on an aggregation of NACE manufacturing and service sectors, we identify four macro-categories: high/medium-high technology manufacturing industries (HMHt), low/medium-low technology manufacturing industries (LMLt), knowledge-intensive services sectors (KIS) and less knowledge-intensive services sectors (LKIS)
If we examine the remaining variables, on average 37% of the observations refer to firms that are part of an industrial group: this percentage ranges from 34% for firms in the LMLt category to 42% for those in the HMHt group
Summary
The closely connected influences of demand and technological opportunities on the strategic decisions of firms to innovate and the aggregate outcomes of these decisions are well established subjects of research in innovation studies, since the seminal contribution of Schmookler (1966). As suggested by Di Stefano et al, (2012), the debate between demand-pull and technology-push perspectives has evolved through different stages, from the rigid adoption of opposing stances by the supporters of demand-pull (Schmookler, 1962, 1966; Myers and Marquis, 1969; von Hippel, 1978, 1982) and its critics (Mowery and Rosenberg, 1979; Dosi, 1982; Kleinknecht and Verspagen, 1990) before settling, more recently, for a more balanced view which sees demand as a complementary (though not dominant) factor determining innovation This body of literature includes both conceptual and empirical contributions (Cainelli et al, 2006; Piva and Vivarelli, 2007; Fontana and Guerzoni, 2008) as well as analyses conducted at both macro- and firm-levels. The arguments put forward by the supporters of technology-push types of innovation incentives touched upon various issues, ranging from the reverse causality of the empirical relationships estimated by Schmookler (1966) and Meyers and Marquis (1969) to the difficulties of identifying the relevant demand affecting innovation incentives
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