Innovation Activities Of Firms Research Articles

Does exporting to China spur firm innovation activities in developing countries?

Trading with developed countries has been shown to promote technological progress. However, it remains unclear whether trade between developing countries promotes or hinders technological progress. To address this gap, the present study utilizes micro data from the 2006–2021 World Bank Enterprise Surveys for 139 developing countries to assess the link between exports to China and innovation activities. We analyze the relationship between exports to China and various proxies for firm-level innovation activities in other developing countries. Our findings suggest that exports to China significantly enhance innovation in other developing countries, regardless of the innovation measures used. The heterogeneous analysis shows that the effects are more pronounced for mature firms and exporters, while young firms and non-exporters are more likely to introduce process innovation directly, rather than spending more on R&D. This effect becomes more pronounced after the implementation of China's Belt and Road Initiative in 2013. The underlying mechanism is that exporting to China (only for capital-intensive goods) could increase the demand for skilled labor, thereby contributing to higher innovation activities among firms in developing countries, as evidenced by firms hiring a greater proportion of skilled labor. These labor adjustments could contribute to the increase in the likelihood of firms introducing process innovation and spending on R&D by 38% and 47%, respectively.

Trade credit provision and innovation: A strategic trade-off

Our study focuses on Chinese-listed firms, revealing a distinct substitution effect between trade credit provision and innovation, diverging from the complementary relationship found in prior U.S. research. We identify a negative correlation between trade credit provision and R&D intensity, particularly evident among supplier firms with reduced bargaining power. Surprisingly, no discernible link emerges between supplier financial distress risk and trade credit provision or R&D outcomes. Additionally, we find that trade credit provision hampers innovation, evidenced by a decline in patent applications and granted patents. These findings suggest that, especially in contexts marked by intense product market competition and incomplete financial markets, supplier firms strategically opt for trade credit provision as an alternative to innovation—a form of relationship-specific investment. Importantly, our results imply that the reduction in firm innovation activities is less likely a post hoc consequence of financial constraints resulting from trade credit provision.

CEOs scientific background and firm innovation: evidence from China

Purpose This study aims to inspect the impact of Chief Executive Officers’ (CEOs) education in a “specific field,” such as CEOs with science and engineering backgrounds on firms’ innovation. Based on agency theory, this study also reports how an endogenous factor, i.e. CEOs’ compensation, and an exogenous factor such as intellectual property rights (IPR), moderate the CEOs with a scientific background (CEOSB)-innovation relationship. Design/methodology/approach This study uses a sample of Chinese nonfinancial firms listed on the Shanghai and Shenzhen Stock Exchanges from 2008 to 2018 by applying the ordinary least squares regression method. To deal with the endogeneity issues, this study also performs a series of additional tests. Findings The results indicate that the effects of CEOSB on the firm innovation activities are positive and significant. Further, this study finds that CEOs’ compensation and IPR protection positively and significantly moderate the CEOSB-innovation relationship. These outcomes are robust to a series of additional tests. Research limitations/implications The results of this study have valuable implications for various stakeholders interested in stimulating innovation. To sum up, the results of this study inculcate these stakeholders that the enhancement of firm innovation is contingent on the appropriate selection of CEOs, effective compensation packages and IPR regulations. Originality/value Distinct from the existent studies, the focus of the study is on the perspectives of CEOs’ scientific backgrounds. Further, based on agency theory, this study also reports how CEOs’ compensation and IPR protection moderate the CEOSB-innovation relationship, which has not been tested earlier to our knowledge, especially in the context of an emerging economy like China.

The effect of external innovation on firm employment

ABSTRACT This paper analyses the effects of product innovations introduced by firms in upstream and downstream sectors and firms in the same sector on firm employment. To this end, we extend the Harrison et al. (2014. “Does Innovation Stimulate Employment? A Firm-Level Analysis Using Comparable Micro-Data from Four European Countries.” International Journal of Industrial Organization 35 (1): 29–43) model and analyse the relationship between firm innovation and employment to account for innovation in the same and related sectors. We employ panel data for the innovation activities of Spanish firms together with input–output data. The results show that product innovation by firms in the same sector harms the firm's employment. We also find a negative effect on employment for the introduction of new products in upstream sectors, which results in the reduction of labour in the focal firm. The type of labour that is negatively affected by innovations introduced by both same-sector and upstream firms is low-skilled. No significant effects are found for innovations introduced in downstream industries.

Expenditures on innovation activities of firms in Poland at the NUTS-2 level (covid and post-covid perspectives)

Expenditures on innovation activities of firms in Poland at the NUTS-2 level (covid and post-covid perspectives)

Import Policy Uncertainty and Innovation

AbstractThe Chinese government has emphasized innovation as the primary driving force for economic development in the new era. This paper studies the effect of import policy uncertainty (IPU) on the innovation activity of Chinese manufacturing firms. It establishes a simple model to show that the presence of IPU encourages innovation and that a reduction in IPU discourages innovation. It distinguishes the almost unnoticed IPU reduction from tariff reduction on China's WTO accession and develops a novel difference‐in‐differences specification that identifies the negative effect of IPU reduction on innovation using updated data for Chinese manufacturing and patent filings. The result holds after a battery of identification assumptions and robustness checks are considered. The import channel explains about two thirds of the effect of IPU on innovation, but not all of the effect. Finally, this paper examines the effect across firms of different levels of productivity and ownership types and patents of different categories.

R&D 조세 지원 정책과 기업 혁신활동 간의 관계 연구

Purpose - The purpose of this study was to analyse the relationship between R&D tax support policy and firm innovation activity using data on firms engaged in 12 national strategic technology sectors.
 Design/methodology/approach - This study collected survey data from 664 companies engaged in national strategic technologies. The data were then analysed using the Propensity Score Matching (PSM) analysis.
 Findings - First, corporate R&D tax support had a statistically significant positive (+) relationship with firm innovation performance. Second, there was a statistically significant positive (+) relationship with incremental innovation, but there was no statistical significance with radical innovation. Third, there was a statistically significant positive (+) relationship with the firm's first innovation, but there was no statistical significance with the world's first innovation. Fourth, there was a statistically significant positive (+) relationship with the number of R&D projects of a firm. Finally, there was a statistically significant positive (+) relationship with a firm's open innovation.
 Research implications or Originality - First, in terms of policy effectiveness, the government needs to consider promoting R&D tax support policies in areas where R&D competition is fierce. For private companies engaged in the 12 national strategic technology fields, the R&D tax support policy is working in the direction of promoting corporate innovation activities, and this positive policy effect is likely to be effective in areas where R&D competition is fierce. Second, if the government wants to improve the quality of corporate innovation activities through R&D tax support policies, it needs to provide incentives higher than the current level.

Beyond the borders: Estimating the effect of China's Bonded Zones on innovation and its spillovers

This paper investigates the direct and spillover effects of place-based industrial policies on firm innovation activities, with a focus on the establishment of Bonded Zones (BZs) in China. By exploiting the temporal, spatial, and industrial variations in the policy, we demonstrate that the establishment of BZs promotes significantly patent applications and citations of firms in leading industries located within and outside of BZs. We also provide suggestive evidence that the innovation spillovers are mainly due to competition among firms within and outside of BZs, namely, the Marshallian externalities.

Using big data for generating firm-level innovation indicators - a literature review

Obtaining indicators on the innovation activities of firms has been a challenge in economic research for a long time. The most frequently used indicators - R&D expenditures and patents - provide an incomplete picture as they represent inputs in the innovation process. Output measurement of innovation has strongly relied on survey data such as the Community Innovation Survey (CIS). However, this type of data suffers from several shortcomings typical of surveys, including incomplete coverage of the business sector, subjectivity concerns, low timeliness, and limited comparability across industries and firms. An alternative that has attracted growing interest is to use big data sources to collect innovation data at the firm level. This paper discusses recent attempts to use digital big data sources including websites and social media to generate firm-level innovation indicators. It summarises the main challenges of using big data and proposes practical guidelines for their use, including a research agenda that should be useful to practitioners as well as users of statistics derived from big data.

Examining the determinants of agricultural innovation activities: a case study of emerging sugarcane farmers in South Africa

ABSTRACT Since innovation is regarded as a source of a firm's development, productivity, and competitive advantage, the identification of the drivers of innovation activities is important for businesses and governments. Based on a case study of 35 emerging sugarcane growers in KwaZulu-Natal's North Coast, South Africa, this study employed the Nossal and Lim framework, which utilised the criteria and methodologies described in the Oslo Manual to measure the innovation activities of firms. The Ordered Probit Model (OPM) was utilised to estimate the factors impacting the innovation activities of the emerging sugarcane farmers. The study findings show that majority of farmers (57%) are highly innovative, with process innovation being the most popular type of innovation. Furthermore, the OPM results revealed that several socioeconomic, institutional, and farm level factors are statistically significant in explaining farmers’ capacity for innovation. Therefore, it is essential for farm managers and policymakers to consider and incorporate these range of elements that have a positive link with innovation and are crucial for new farming ideas.

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This study investigates the effects of informal sector competition on innovative activities of firms using a global context. The research results using Probit regression for a sample containing more than 97,000 observations in 119 countries suggest that informal sector competition has a positive impact on firm innovation. The finding is consistent when using alternatives measures of innovation and informal sector competition. In addition, the positive association between competition from informal sector and innovation is confirmed when using various alternative econometric techniques.

Measuring process innovation output in firms: Cost reduction versus quality improvement

Process innovation is an important part of the innovation activities of firms and supposed to significantly contribute to the returns from innovation. Analysing this link is complicated, however, due to a lack of quantitative indicators on the outcome of process innovation. This article presents empirical evidence on such quantitative measures that have been collected in the German part of the Community Innovation Survey (CIS). Two main output dimensions are distinguished. The share of unit cost reduction owing to process innovation represents the extent to which new process technology affects a firm's cost function. The increase in sales that can be attributed to higher product quality resulting from new or improved process technology is linked to the impact of process innovation on a firm's demand function. The empirical analysis based on firm-level panel data shows that the link between firm characteristics, firm performance and the two types of output differs as expected by conceptual considerations. The results suggest that the two proposed measures of process innovation output are useful indicators to capture the type and magnitude of the outcome firms obtain from their process innovation efforts.

Subsidies, financial constraints and firm innovative activities in emerging economies

Subsidies, financial constraints and firm innovative activities in emerging economies

Proximity to the technological frontier as a factor of firms’ competitiveness in Russia

Goal: to identify and analyze the factors of Russian firms’ proximity to the technological frontier; the specifics of innovation activity of firms at different distances to the technological frontier; the relationship between the proximity of firms to the technological frontier and their competitiveness. Methodology: econometric analysis of data from a survey of over 700 firms in Russian non-energy industries conducted in 2019. Findings: the technological leadership of Russian firms is positively related to their size, market power, implementation of innovations, primarily process ones, as well as R&D funding, including those performed by external contractors. Borrowing of advanced technologies is characteristic of both lagging companies and leaders. However, the latter are more open to external knowledge and active in searching for advanced solutions and practices, primarily abroad. Foreign direct investment contributes to catching-up technological development rather than to gaining leadership. A positive relationship between the proximity of firms to the technological frontier and their competitiveness is revealed: technology leaders, other things being equal, are characterized by higher labor productivity and export activity. In addition, leading firms were more likely than others to increase their productivity, output, market share and exports. Originality and contribution of the authors: while much attention is paid in the modern economic literature to the competitiveness of firms and their distance to the technological frontier, these issues are rarely considered in relation to each other. The study partially fills this gap. The authors apply an innovative approach to determining the proximity of firms to the technological frontier, based on a combination of the level of technologies used and the novelty of products (services) produced. Characteristic features of Russian firms at different distances from the technological frontier and peculiarities of their innovative behavior are revealed It is shown that along with the introduction of advanced technologies Russian firms have other ways to ensure their competitiveness.

Can hurricanes drive green innovations?

We propose that natural disasters (specifically hurricanes) encourage the development of green innovations in small island developing states (SIDS). Using a novel and unique dataset of hurricane instances and green innovation activities in SIDS, we find that hurricanes follow a U-shaped relationship with green innovations. This suggests that while initially hurricanes negatively impact green innovations, as firms experience more hurricanes, this will trigger the development of green innovations. Our results also reveal that present and future government regulations act as antecedents to green innovation, however government incentives (i.e., grants, subsidies, and financial incentives) are not found to impact on firms' willingness to develop green innovations. Furthermore, customer/market demand and industry codes of environmental good practice (societal influences) are found to trigger green innovation activities in SIDS firms. Finally, we find that hurricanes have no significant effect on other ‘traditional’ types of innovation. Our study deepens understanding of the underexplored nexus between natural disaster events and green innovations and has implication for optimizing policy design (‘command and control’ regulations vs ‘market-based’ incentives) for green innovations.

Credit ratings and firm innovation: Evidence from sovereign downgrades

This study investigates the relationship between credit ratings and firm innovation activities using a cross-country sample over the 1995–2020 period. Exploiting the setting of rating agencies’ sovereign ceiling policies, our main analysis shows that a one-notch reduction in corporate credit ratings engendered by sovereign downgrades, on average, leads to a 5.90% reduction in research and development (R&D) spending. We identify the substitution of external acquisitions for internal expenditures and the increase in creditor control as the underlying mechanisms of the causal relation. Moreover, the negative impact of credit rating downgrades on R&D investment results in deterioration in patent output and firm performance. The cross-sectional analysis shows that the observed effects on innovation and firm performance are concentrated in firms with higher external finance dependence or more growth options.

Peer effect on green innovation: Evidence from 782 manufacturing firms in China

In recent years, green innovation has become an important means of achieving sustainable development, but the impact of peer firms on green innovation is less discussed. To fill this research gap, this paper explores the effect of peer firms on the green innovation activities of the Chinese A-share listed firms in the manufacturing industry from 2011 to 2020 and investigates influencing factors of peer effect. The main findings are as follows. First, there is a peer effect in making green innovation decisions. Second, industry competition has a positive moderating effect on the peer effect of green innovation. Third, digital financial inclusion and government intervention both promote the peer effect of green innovation. The peer effect is more significant with a high degree of digital financial inclusion. But the peer effect has no significant difference between different degrees of government intervention. This paper aims to explore the influencing factors of a firm's green innovation from the perspective of peer effect. The research results can provide a guide for the government to better promote green innovation activities of firms and benign competition in the industry.

Heterogeneous knowledge spillover channels in universities and green technology innovation in local firms: Stimulating quantity or quality?

Sluggish status of green technology development has stimulated research into new incentives and pathways. Beyond the traditional regulatory-push and demand-pull approaches, we reposition the strength of the technology push. Based on the innovation diffusion theory, a multidimensional path model of knowledge spillover in universities is constructed, and the impact of heterogeneous knowledge spillover channels on green innovation activities of local firms is discussed. We find that R&D collaboration has a significant effect on local firms' quality but not the quantity of green innovation. Contrarily, patent citations and technology transfer have unequal positive effects on the quantity of green innovation of local firms, while there is no evidence that they can also improve the quality of green innovation. Despite regional disparities, strict environmental regulations are pushing companies to cite university patents in some regions. The university knowledge stock has largely contributed to both quantitative and qualitative advances in subsequent green innovation in local firms. Our conclusions provide a precise and objective evaluation of the impact mechanism of multiple knowledge spillover channels in universities on firms' green innovation, as well as a reference for the selection of the form of industry–university–research collaboration.

The role of market competition for knowledge competencies, R&D and innovation: an empirical analysis for German firms

PurposeKnowledge competencies and (R&D) activities are one of the most important sources of innovation and have been widely discussed in the literature. In comparison, the role of the competitive environment for the innovation activities of firms is still open to debate and has not been fully understood yet. Therefore, this paper intends to provide new evidence on the interaction between knowledge competencies and R&D activities of firms on the one side and their competitiveness in the market environment on the other. In particular, the moderating function of market competition is explored. In this respect, the analysis covers the main innovation types as well as both sectors, manufacturing and services.Design/methodology/approachThe empirical analysis is based on a three years panel dataset of German manufacturing and service firms obtained from Mannheim Innovation Panel (MIP) and Community Innovation Surveys (CISs: 2011, 2013 and 2015). For the estimation, a binary instrumental variable treatment model with Heckman selection method is used. Also, it provides a suitable approach to estimating the binary variables in order to cope with endogeneity concerns.FindingsThe estimation results show that R&D activities and knowledge competencies are positively related to innovation activities of different types conditioned on firms' specific perception of their competitive environment, in terms of outdated products/services as well as strong competition from abroad. Most importantly, the results from the moderation estimation reveal that there is a significant difference between the manufacturing and service sector. Service firms engage more in internal R&D activities on generating product innovations while the manufacturing firms conduct more external R&D on specific types of innovation. Further, the authors find that strong competition from abroad positively and significantly reinforces the effect of knowledge competencies on innovation activities for more types in services than in manufacturing. In contrast, outdated products and services tend to decline the effect of knowledge competencies for some innovation types in both sectors. The authors also observe a positive and significant reinforcement effect on knowledge competencies. However, it is found more beneficial for service firms since they can employ more innovation strategies.Originality/valueThe focus of the study is mainly on the impact of firms' competitive environment on innovation activities in various types through its interaction with knowledge competencies and R&D activities, across manufacturing and service firms.

The Effects of the Innovative Decisions on Firms’ Innovative Performance of Nigerian Industry

Firms have to keep innovating if they want to maintain competitive advantage; hence, this study investigates the innovation activities in Nigerian firms considering the role Nigeria plays in the African economy. Specifically, the objectives of this study are to (1) to determine the factors that affect firms’ innovative activities and (2) to evaluate the impact of the innovative decision on innovation performance or product of firms. 2014 Enterprise survey data conducted by the World Bank is used, and CDM-model is adopted as the method of analysis. The results showed that improved supporting activities by firms has a significant positive relationship with firms’ innovative performance, and giving employees time to develop new idea has a positive impact on innovation performance. Finally, the study recommends that firms should embark on the job training of staff because it will help them be more efficient by improving the working process.