Abstract
Identifying the determinants of firms’ investment in knowledge, this study first explores the heterogeneous impacts of research and development (R&D) on product, process, organization, and marketing innovation. Second, it examines if there exists a complementary (substitute) relation in terms of firms’ preference between four types of innovation. Studying 1500 firms of seven developing economies of the Association of Southeast Asian Nations (ASEAN), we applied the least absolute shrinkage and selection operator (LASSO), a machine learning-based regression, to identify key predictors likely to influence firms’ R&D propensity and intensity. Estimating the knowledge function, we found—in line with LASSO—that medium-sized firms, human capital (training) and credit facilities favorably affect firms’ decision to invest in R&D. Contrarily, the impact is adverse if the first or main product generates firms’ large share of revenue, a unique finding not captured by previous studies. The marginal effects of four univariate probit models indicate that firms’ investment in R&D translates into innovation. However, the application of the Geweke–Hajivassiliour–Keane (GHK)-simulator based multivariate probit, which considers simultaneity of firms’ innovation decisions that univariate probit ignores, suggests that the relationship between different types of innovation is complementary. Firms’ strategy to adopt a particular type of innovation is influenced by other types. This led to the estimation of R&D’s impact on technological and nontechnological innovation, which shows that while firms innovate both types, there is a skewed link between nontechnological innovation and the services sector.
Highlights
A large number of developing countries achieved rapid economic growth in the past few decades
The synthesis approach encompasses both goods and services as well as technological and nontechnological modes of innovation [18]. The importance of this framework is heightened by the fact that the boundaries between goods and services have become blurred [19], which is discussed in “servitization of manufacturing” literature at length [20]. Against this backdrop, using microdata of 1500 establishments, we study the linkages between knowledge input (R&D) and output, concentrating on a group of developing economies of the Association of Southeast Asian Nations (ASEAN)
We found onlyanoalnyseis sistduondeyfoltlohwaintgeaxglpoblaol rmeedthotdholeoglyi.nk between research and development (R&D) and innovation that concentrated on product innovateivoidneBne[cs3eidt1hesa],t.agBmiveeenrestpihdreodeiunstc,etroidrteapniesdndpoeronbctesnsesaitrnuvnreoevodaftiotthnheisainintnsou“vftafihtciioeenntmptoroiecnetaessrspu[r2e8rt]ie,nmnthoevreaetniiostngionroffwiriminnsg.novation is still at a relatively nascent stCaognceerinningSoorguantihzaetiaonsatl iAnnosviaati”on[, 2ve1ry].little attention is paid to it, thereby leading to a scarcity of empirical studies [29]
Summary
A large number of developing countries achieved rapid economic growth in the past few decades. Identifying the determinants of investment in R&D, it explores the heterogeneities in terms of the relative impact of R&D on product, process, organization, and marketing innovation It identifies if there exists a complementary (substitute) relation concerning firms’ innovation preferences between the four types of innovation. Idn tuheccta,seporf ocess, organization, and marketing) to ScuoonuncthedneeatrsarttseAdtsaioann, wpdreofdoRuuc&ntdinDonnolvyianotinovenes[3tsu1dt].myBethseiadnteestx,’pistloisrreoedblsteahrevtielivdnktehbaetct“wotheneenmtrReia&bsDuureatmnideoninnt nooftvinoantioobvnaottihtoahnt technological and nontechnological inisnstoillvataatrieolantiv.elyFniagsceunrt setag2e,inbSoaustheedast oAsnia”o[21u] r sample, shows that there is a large gap of innovation effort To address these limitations, we use all four types of innovation (product, process, organization, baansdedmarokentinfig)rtmo usn’deirnstatnadnRg&iDbiinlvietsytm, ewnt’istrhelaRtiv&e cDontrfiibrutmionstobbeoithntgechmnoulogcichal mandore innovative than non-R&D plants. As Cirera [32] observed, “one vital component in the decision to innovate is that firms decide at a time what innovation results to produce based on existing knowledge capital investments For this reason, one should expect some interdependency between the decisions to undertake product and process innovation, and perhaps organizational innovation.”. Hypothesis (H2): There exists complementary (substitute) relations between the four types of innovation
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