Innovation Expenditures Research Articles

Current state of development of innovation activity at the enterprises of manufacturing industry

The article "The current state of development of innovation activity in manufacturing enterprises" examines the level and dynamics of innovation activity in Kazakhstan, focusing on manufacturing enterprises. The authors analyse the existing theoretical approaches to the definition of the concept of "innovation activity", study the state support of SMEs in this area and analyse statistical data on innovation activity in medium- and high-tech sectors of the manufacturing industry in Kazakhstan. The study identifies a number of problems: low level of innovation activity of enterprises, inefficiency of innovation expenditures, as well as a number of factors limiting the development of innovation activities, such as lack of demand for innovation, lack of financial resources, market uncertainty and lack of qualified personnel. The article offers a number of recommendations to improve the situation: the need for a systematic approach to the technological modernisation of industries, open discussion of the results of state programmes, adequate assessment of enterprises' capabilities for innovative development and setting target indicators.

Multicriteria Analysis of Innovation Ecosystems and the Impact of Human Capital and Investments on Brazilian Industries

Innovation is one of the main factors associated with industrial growth, as it contributes to increased productivity, sustainability, and international competitiveness. There is a certain degree of complexity in measuring innovation, since there are various metrics for this purpose, and each sector of the economy handles it differently. In Brazil, the Industrial Survey of Technological Innovation (PINTEC) was developed to construct sectorial indicators on innovation activities. Based on these data, this paper investigates how ten sectors of the economy performed during two historical series (2011 to 2014 and 2014 to 2017) considering five criteria linked to the innovation process and the impact of qualified human capital. The problem is analyzed in light of multicriteria decision analysis (MCDA), using preference ranking organization methods for enrichment evaluation (PROMETHEE II) to provide a ranking of Brazilian industrial sectors. The results show how the sectors have changed over the years, highlighting that innovation expenditure proved crucial in measuring companies’ commitment to innovation, but also show that a highly qualified workforce emerged as a leading factor. Furthermore, the research presents which criteria have contributed positively and negatively to each sector, which can serve as drivers for policy formulation to strengthen the Brazilian industry.

Innovation investment and performance: the moderating role of university collaborations

Purpose Considering the historical evolution of innovation dynamics, and its paradoxical state, and answering Nelson (2008) and Winter (2014), this paper aims to analyze the dynamics of innovation within the context of the Evolutionary Economic Theory. Specifically, this study looks to unravel the moderating influence of university cooperation on the relationship between innovation expenditure and innovation results. This study aims to provide valuable insights and evidence that can inform strategic decision-making for policymakers and businesses striving to foster innovation-driven economic growth in an ever-evolving global landscape. Design/methodology/approach The quantitative methodology adopted in this study involved harvesting data from the Latin American Innovation Survey (LAIS) database and cleaning it up using Python to ensure data integrity. Subsequently, SPSS, coupled with the PROCESS macro, was employed to conduct moderation analysis. This methodological approach enabled the examination of the intricate interplay between innovation expenditure, university cooperation and innovation outcomes within a large sample of firms, thereby easing a robust exploration of the hypothesis. Findings The research highlights the moderating role of university cooperation, showing that collaborative partnerships amplify the impact of innovation spending on innovation results, advancing the understanding of the impact of university-business collaborations. Additionally, the results revealed a positive relationship between innovation expenditure and innovation results, underscoring the significance of R&D investments. Practical implications This study highlights the role of university-industry collaborations in enhancing innovation investment outcomes in Latin America. It suggests that managers should proactively engage with universities to access advanced research and foster a culture of innovation. These partnerships can significantly boost a firm's competitive edge and innovation success, marking them as crucial in the rapidly evolving economic environment. Originality/value The originality of the paper relies on bridging theoretical concepts from the Evolutionary Economic Theory framework with empirical insights of the moderating role of university cooperation. It addresses a theoretical gap, with a new methodology and offers insights into the complex relationship between universities, businesses and innovation in a constantly changing economic environment, making it clearer how these connections can help boost innovation in practical ways.

Wie steht es um die Innovationsfähigkeit Deutschlands?

Abstract Innovation is crucial to economic development. Innovation expenditures in Germany’s business sector as well as public funding for science and research have been increasing in the past decade. However, the share of businesses with innovations – especially among the small- and medium-sized ones – decreased from 70% in the 2010s to 50% in 2022. Likewise the share of sales from new products and collaborations between science and industry have been declining in recent years. This might be explained by certain barriers to innovation. Increasingly important hampering factors are the lack of qualified employees and the burden of regulation and bureaucracy. Policy measures to support Germany’s innovation capacity should tackle the reduction of such constraints that currently reduce the return to investment into R&D and innovation.

REGULATORY COMPLIANCE AND ACCESS TO FINANCE: IMPLICATIONS FOR BUSINESS GROWTH IN DEVELOPING ECONOMIES

This paper examines how regulatory compliance requirements and access to suitable financing sources influence business growth potentials, particularly for small and medium enterprises in developing economies. The critical linkages between these factors are established through a review of academic literature and real-world case studies. Strict or disproportionate regulations are shown to impose significant compliance costs that hinder investments and expansionary activity. Lack of access to credit also constrains working capital and innovation expenditures needed to drive competitive advantages. A range of regulatory and financial system reforms are recommended to remove unnecessary bottlenecks while maintaining prudent oversight. Proposed strategies aim to streamline and digitize compliance, build capabilities, tailor support for micro-enterprises, and broaden credit availability. If implemented effectively, these recommendations can optimize developing countries' regulatory environments to maximize the productive contributions of small businesses.

ІННОВАЦІЙНА АКТИВНІСТЬ ДЕРЕВООБРОБНОЇ ПРОМИСЛОВОСТІ УКРАЇНИ: АНАЛІТИЧНИЙ ОГЛЯД

This article provides an analytical review of the innovation activity in Ukraine’s woodworking industry, examining the dynamics of change, the main challenges and opportunities that arise in this sphere. The aim of the article is to review and analyze the innovation activity in Ukraine’s woodworking industry in order to identify key trends, challenges, and opportunities that influence its development in the context of contemporary military and economic realities. The woodworking industry in Ukraine has significant potential for development thanks to its natural resources and geographical position. However, modern global trends and internal economic challenges require the industry to adapt and innovate. It has been found that the Ukrainian woodworking industry faces challenges related to a decrease in innovation activity and investments in the sector. The decline in innovation activity over recent years threatens not only the competitiveness of Ukrainian enterprises in the global market but also their ability to sustain development. This has occurred against the backdrop of economic difficulties, insufficient state support for innovations, as well as the onset of full-scale war and global economic challenges. With the decrease in the number of innovation-active enterprises in the woodworking industry, the need to update the technological base, develop new products that can be recycled or reused, and implement energy-saving technologies becomes important. Such steps can help increase efficiency and reduce the environmental impact of production processes. While overall innovation expenditures in Ukraine have decreased, in some sectors, such as industry, there is an increase in innovation spending, indicating a continued interest in innovation in these areas. An important aspect is also focusing on the eco-friendliness of production and implementing innovations aimed at reducing the negative impact on the environment, which can become a competitive advantage and an important element of a sustainable development strategy. In the context of sustainable development and post-war recovery in Ukraine, these data indicate the need for reinvestment in innovation to support the long-term growth of the woodworking industry. It is important to focus on supporting and stimulating innovation to ensure the dynamic development of the industry, which can contribute to the economic recovery of the country and its long-term stability.

CEO Early-Life Disaster Experience and Tax Avoidance: Chinese Evidence

Synopsis The research problem This study examines the impact of chief executive officers (CEOs)’ early-life disaster experiences on corporate tax-avoidance behaviors and explores the mechanisms through which these experiences influence these behaviors. We use the Great Chinese Famine of 1959–1961 (hereafter the Great Famine) as an indicator of early-life disaster experience. Motivation or theoretical reasoning Our study is motivated by the following reasons. First, like many major economies worldwide, corporate income tax is an important source of tax revenue in China. The financial impact of corporate income tax on a country’s economy is enormous. Second, the Great Famine was one of the most destructive natural disasters in human history, which is likely to have a lifelong influence on CEOs who lived through the disaster as children and teenagers. Third, corporate tax strategy is a significant accounting, financing, and managerial behavior of firms that is influenced by multiple internal and external factors. However, there are limited findings on the impact of CEOs’ early-life disaster experience on corporate tax decisions. The consequences of this impact remain unclear. The test hypotheses We hypothesize that CEOs’ early-life famine experience mitigates corporate tax aggressiveness. We also consider the alternative hypothesis that CEOs’ early-life famine experience increases corporate tax aggressiveness. Target population Our sample includes Chinese listed firms from 2013 to 2020 led by CEOs who have or who do not have early-life disaster experiences. Adopted methodology We employed ordinary least square regressions in our analyses. Analyses Since the Great Famine occurred between 1959 and 1961, we considered CEOs to have experienced famine if they were born prior to or in the year 1961, in a province affected by the Great Famine (e.g., Hu et al. , 2020 ; Zhang , 2017 ). We identified a province as significantly affected by famine if its abnormal death rate was greater than the median abnormal death ratio of all Chinese provinces during the period of famine. Following Dyreng et al. ( 2010 ), Hoi et al. ( 2013 ), Koester et al. ( 2017 ), and Rego & Wilson ( 2012 ), we used effective tax rate as the first proxy of tax avoidance for a firm. Additionally, in line with Desai & Dharmapala ( 2006 ) and Hoi et al. ( 2013 ), we used the discretionary book-tax differences of firms as an alternative proxy to measure corporate tax avoidance. Findings The findings indicate that CEOs who experienced the Great Famine at a young age significantly reduced their firms’ tax-avoidance efforts. Furthermore, the negative association between CEOs’ early-life famine experiences and corporate tax-avoidance behaviors is more pronounced for companies with higher independent director ratios. These negative associations appear more obvious for firms with CEOs who experienced famine early in life and for females. The economic mechanism of the findings demonstrate that CEOs’ famine experiences make them more conservative in investing in innovative projects; they are more likely to fulfill corporate social responsibility and work in state-owned enterprises. Furthermore, firms with lower innovation expenditure, effective corporate social performance, and government ownership are less likely to display tax-avoidance behaviors.

Complementarity between product and process innovation in small and micro-enterprises in Johannesburg, South Africa

ABSTRACT Innovation is important to firms’ productivity, competitiveness, agility, resilience and growth. The success of a firm’s innovation strategy depends in part on how it combines and absorbs different innovation activities. Using the Crépon-Duguet-Mairesse (CDM) structural model, this paper analyses complementarity between product and process innovation for the case of small and micro manufacturing firms in Johannesburg, South Africa. The empirical analysis utilises rich new firm-level survey data that, unlike most firm surveys, includes micro-sized firms as well as informal enterprises. Our results show strong evidence of complementarity between product and process innovations in their effects on firm performance. The results suggest that firm size, capital intensity, firm age, innovation expenditure and financial constraints are key variables associated with complementarity. We extend the specifications used in previous studies to take account of the contextual setting, with split samples by firm formality, ownership and size. We find evidence of complementarity in formal firms only. Our results also show stronger effects of complementarity in micro-firms and foreign-owned firms. The findings have relevance for promoting innovation and for enhancing the effects of innovation on firm performance among micro- and small enterprises (MSEs) in a developing country context.

Innovative activity in the basic metals industry: comparative analysis with EU countries

Methods. In the process of studying innovation activities in the basic metals industry of Ukraine and European countries, methods of analysis and synthesis, empirical methods, induction and deduction techniques, graphical, logical and tabular methods were used. The methodological basis of the study was the methods of comparative analysis and observation, which made it possible to assess the current state of innovative activity in the basic metals industry of Ukraine. The graphical method made it possible to visualize the results of the study. Results. The use of comparative analysis made it possible to assess the current state of innovation activity in the basic metals industry of Ukraine in comparison with European countries. A comparative analysis, based on key indicators of innovation activities of industrial enterprises, was carried out. These indicators include the number of innovation activities of industrial enterprises; enterprise innovation expenditure of industrial enterprises; the number of introduced technological processes of industrial enterprises; the number of introduced innovative products (goods, services) of industrial enterprises; and total turnover from innovation activities of industrial enterprises. The analysis was carried out using public statistical data from the State Statistics Service of Ukraine and the statistical office of the European Union. It is revealed that innovation activities in metallurgical industry of Ukraine in terms of key indicators is significantly lower than in European countries. The main problems of functioning of the metallurgical industry of Ukraine are identified as part of the global industry. Novelty. There are proposed the main directions for improving innovation policy in the manufacture of basic metals to increase its competitiveness in the world market. Practical value consists in developing proposals to improve innovation policy in the basic metals industry. The results of the study can be applied for further research of innovation activities in metallurgical industry of Ukraine.

Do economic growth target constraints affect firm innovation?

Compared with Europe and the United States, there has been a unique phenomenon of high economic growth and low investment in research and development by firms in China. Based on the promotion tournament theory, this study examines the influence of economic growth target constraints on firm innovation, using over 8654 listed manufacturing businesses in 230 prefecture-level cities in China. We demonstrate that hard constraints and top-down amplification significantly inhibit firm innovation, whereas soft constraints promote it. Additionally, the inhibitory effect is considerably pronounced on breakthrough innovations, as well as in eastern regions and for SOEs. There is also preliminary evidence that hard constraints inhibit firm innovation through two channels: crowding out science and technology innovation expenditures (neglecting innovation) and inhibiting industrial structure upgrades (preferring production). Overall, our study contributes to understanding how macroeconomic growth targets affect firm innovation. The conclusions of our study apply to policymakers in China and other economies that regularly set economic growth targets.

Local knowledge spillovers and the effects of related and unrelated variety on the novelty of innovation

ABSTRACT Knowledge spillovers have been identified as a factor affecting the unequal distribution of innovation in space. In this paper we aim to understand how territorial factors shape the novelty degree of innovations. Thus, we perform an empirical analysis that relates territorial factors to innovative performance at the firm level. Our results show that local knowledge spillovers from research and development expenditures are positively associated with upper-level innovation, while local knowledge spillovers from total innovation expenditures are not related to the degree of novelty of innovation. Furthermore, the impacts on innovation are also moderated by related and unrelated varieties since firms in regions with higher regional-related variety are less likely to generate upper-level innovation.

Bonding or Indulgence? The Role of Overborrowing on Firms’ Innovation: Evidence from China

This paper examines the innovation spending gap associated with overborrowing in China’s state-owned enterprises (SOEs). Based on the double agency problem of the banking sector, the authors hypothesize that SOEs are more inclined to a higher level of overborrowing and therefore worsen firms’ debt governance system for innovation. We argue that obtaining excessive bank loans has an indulgence effect and is used by firms’ managers as an entrenchment strategy for underinvestment in innovation. We test our theoretical model under the unique institutional setting of China’s banks, in particular the administrative-economic governance. Using a longitudinal panel dataset that contains a cross section of Chinese listed companies from 2012 to 2018, we confirm overborrowing’s mediating role between state ownership and firm innovation expenditure, implying that enhancing the delegated monitoring of banks is also essential to firm innovativeness in transition economies. Additionally, we further test the role of political connections and managers’ R&D functional experience to leverage the benefits of SOEs’ innovation resource endowment. Our study demonstrates another debt governance channel through which government intervention has a negative impact on firm innovation resource allocation. It expands the understanding of the debt governance role for innovation in transition economies.

Taxation and innovation: evidence from Colombia

ABSTRACT We use firm-level data from a Colombian manufacturing survey, complemented with data from the tax department, to test the effect of firms’ total tax and contribution rate (TCR) on the ratio of innovation expenditures to sales. We construct a data panel from 2003 to 2018 comprising 104,762 observations and implement fixed effects and instrumental variables estimation methods. Our results suggest that an increase of one percentage point in direct taxation leads to a decrease of 0.10% in the probability that firms engage in innovation investments, and market power moderates this effect. We discuss distinctive features of the effect of taxation on innovation in emerging economies—one being the inability of local innovation clusters to temper it. Policy implications include considering modifications to the magnitude and composition of the TCR as an alternative to R&D tax credits.

Environmental regulation effect on green total factor productivity in the Yangtze River Economic Belt

As a typical watershed ecological economy in China, the Yangtze River Economic Belt has two equally important objectives, namely ecological protection and economic development. Improving green total factor productivity is an essential approach to achieve these two objectives and promote sustainable growth in this area as well as the whole country. Therefore, this study explores the impact of environmental regulation on green total factor productivity with a panel data of 108 cities in the Yangtze River Economic Belt between 2003 and 2019. We first adopt the super slacks-based measure model to estimate city-level green total factor productivity. With kernel density curve, we find that green total factor productivity shows a downward pressure, and its absolute difference among cities shows a narrowing trend. Trend surface analysis displays an inverted U-shaped as well as a U-shaped spatial structures of green total factor productivity in the north-south as well as east-west directions, respectively. By using Spatial Durbin Model, we find a U-shaped direct impact of environmental regulation on green total factor productivity for the entire sample and three subsamples. For an indirect effect, environmental regulation has a positive spatial spill-over impact in the entire area; an insignificant effect in upstream and midstream areas; and an inverted U-shaped spatial spill-over in downstream area. Besides, we utilize threshold effect analysis to explore the impacts of technology innovation. The results show a single-threshold effect of technology innovation and the promotion effect decreases when technology innovation expenditure exceeds the threshold value. Based on our research findings, we suggest that the authorities should adhere to implementing and increasing the intensity of environmental regulation, so as to achieve better policy results. Moreover, local governments should keep technological innovation expenditure at a reasonable level to maximize the promoting effect of environmental regulation on green total factor productivity.

Government innovation support for green development efficiency in China: A regional analysis of key factors based on the dynamic GMM model

Local government innovation support (LGIS) is an exogenous pulling force for high-quality economic development. Accurately identifying the mechanism by which LGIS affects green development remains practically and theoretically significant for building a long-term framework for driving green development. Based on provincial panel data (2010–2019), this paper uses the Super-SBM model to measure the green development efficiency (GDE) of different provinces in China. A dynamic panel GMM model is constructed to evaluate the significant relationship between LGIS and GDE and to explore the potential impact mechanism of other key factors such as fixed asset investment (FAI), environmental regulation (ER), industrial structure (IS), and foreign direct investment (FDI) on GDE. The estimation showed that LGIS had a positive impact on GDE. The data analysis indicated that GDE in the lag period significantly affected the GDE in the current period. More so, as per the results, the promoting effect of GDE in the second lag period gradually weakened due to the decline of LGIS and ER restrictions. The current model also revealed that FAI and ER inhibited the GDE progress, while IS and FAI had improved the state of GDE in the region. The research findings imply that China should further increase the government innovation expenditure, FDI utilization, and IS upgrade to promote high-quality economic development.

The effect of urban innovation performance of smart city construction policies: Evaluate by using a multiple period difference-in-differences model

In the setting of Digital China, the smart city pilot strategy has become a fundamental part of the intelligent upgrading of the urban development model. Exploring the influence of smart city pilot policies on urban innovation performance is critical for achieving high-quality economic development and creating an innovation-driven country. This study views the experimental smart city policy in China as a quasi-natural experiment and assesses the improved influence of smart city development on urban innovation performance by constructing a multiple period difference-in-differences (DID) model, then confirms it using a variety of robustness test methodologies. The results show that urban innovation performance benefits from the construction of smart cities, and the promotion effect is sustainable. The level of economic development and information infrastructure, as well as the financial innovation expenditure, have a beneficial effect in encouraging smart city construction innovation performance, while the degree of opening-up hinders the improvement of smart city urban innovation performance. In addition, it is also found that there is heterogeneity in the promotion effect of smart city building on urban innovation performance. The research of this paper provides useful enlightenment for better exerting the promotion effect of smart city building on urban innovation performance.

Environmental protection investment and enterprise innovation: evidence from Chinese listed companies

PurposeChina has emerged as the world's second-largest economy due to rapid industrial expansion and phenomenal economic growth of China in recent decades. Though, this exponential economic turnaround has been fueled by widespread energy consumption, making China among the largest pollutant emitters in the world. Chinese enterprises have come under greater scrutiny and the Government has mandated Chinese companies to undertake environmental protection investment. This study aims to explore the relationship between environmental protection investment and enterprise innovation by taking evidence from Chinese listed firms.Design/methodology/approachThe data of 2,568 Chinese A-share listed firm-year observations were collected from the Shanghai and Shenzhen stock exchanges during 2008–2016. This study employed ordinary least square and panel data fixed effects techniques to ascertain the association between proposed variables.FindingsThe authors' findings conjecture the crowding-out effects of environmental investments on enterprise innovation-related expenditures. Furthermore, additional empirical testing reveals that Research and Development (R&D) undertakings of state-owned and politically connected enterprises are not affected by environmental investments. Likewise, corporate innovation activities are not negatively influenced by environmental investments in polluting industries. The study findings offer fresh insights to regulators, corporate managers and stakeholders. The authors' results are robust to alternate econometric specifications and alternate variable specifications.Originality/valueThis study makes the following contributions toward the extant literature. First, the study investigates if there is a crowding-out effect of spending on environmental protection in the current period and the innovation expenditure in the upcoming period. Empirical results confirm that there exists a trade-off between both types of spending, implying that the spending on environmental protection will negatively influence the spending on innovation. Second, the study deepens the analysis in considering other influences in this relationship. For instance, the authors' separately consider the aforementioned trade-off in state-owned enterprises and non-state-owned enterprises. The study also examines the mediating influence of corporate political connections and industry attributes, whether or not these influence the relationship between the actual spending on environmental protection and the upcoming spending on innovation.

The benefits of hiring a STEM CEO: Decision making under innovation and real options

This paper investigates when firms select CEOS with STEM qualifications in order to understand the benefits to the firm of such skills. Using CEO turnover events at S&P1500 firms, we find evidence to support the hypothesis that CEOs with a STEM degree are better able to recognize and value the real options embedded in innovation expenditures and capital projects. In technology innovation literature, ambidexterity theory features prominently explaining that innovation often emerges from leadership that is capable of making decisions amidst ambiguity. We argue that real options, a financial mechanism for budgeting amidst ambiguity, are very important with innovation. They require different methods of decision making, and a CEO with a STEM background may be best able to incorporate these decision-making methods into the firm. Consistent with this hypothesis, we find that the individual firms' R&D intensity and acquisitiveness, and industry R&D intensity and gross investment increase the probability of a firm selecting a CEO with a STEM background; whereas being in a technology industry, growth potential, and the firm's own gross investment have no direct impact on the selection of the CEO.

Development and cohesion in Spanish regions. An analysis before and after the Great Recession

Regional cohesion has been one of the European Union's objectives since its origins. Its strategies and implementations have been modified over time, adjusting to the incorporation of new members and to different economic cycles. To gain more knowledge about the impact of cohesion policies, we use the Lisbon Regional Index, a synthetic indicator that brings together the global objectives of the Lisbon Strategy, that includes simple indicators of employment, training and research, development and innovation expenditures of the regions. The evolution of this Index over time gives the possibility of dynamic analysis and enables comparing the values of synthetic index for all the years of the considered period. Thereby, the development and cohesion on the Spanish regions can be evaluated, and it is verified how cohesion has improved in Spain in the expansive period (2000-2007) and how the Great Crisis has caused a regression of cohesion, affecting to a greater extent the regions "in transition" and "less developed", reaching levels prior to 2000. The next period (2014-2019) shows important signs of positive trend recovery.

The biotechnology sector in a latecomer country: The case of Poland

This paper offers a detailed firm-level analysis of innovation strategies, exporting activities and employment and sales dynamics of Polish biotechnology companies. The study is based on the unique dataset provided by three runs of the Polish edition of the Community Innovation Survey (CIS). Poland is a latecomer in the biotechnology industry, as are all the Central and Eastern European Countries (CEECs). In addition, the Polish biotechnology sector faced relatively unfavorable starting conditions: no partners in the pharmaceutical industry and, unlike some other CEECs, little government support. Nevertheless, biotechnology companies have developed in several Polish industries. It is shown that these companies implement innovation strategies that are typical for the biotechnology sector; however, they do not cooperate much with their clients. The innovation expenditure of biotechnology companies is distinctively higher than that of other companies. In addition, government and EU grants play a crucial role in funding the R&D activities of Polish biotechnology companies. This reflects the change in the innovation policy in Poland, but also raises the question of the sustainability of these efforts. Biotechnology companies are strongly export-oriented but, contrary to expectations, their dynamics are average: when controlling for firm characteristics and export performance, biotechnology companies neither outperform nor underperform other companies in terms of sales or employment growth.