Understanding innovation: An analysis of persistence for Spanish manufacturing firms

Abstract

This study focuses on the persistence of innovation in a panel of Spanish manufacturing firms for the period 1990–2008. In particular, we analyse whether persistence in firms’ innovation activities over time is the result of previous experience, the dynamic capabilities of the firm or industry-market related characteristics. We find that R&D (input) and innovation (output) are highly persistent at the firm level. After controlling for unobserved heterogeneity and initial conditions and by using a dynamic random effects probit, we conclude that there are similar determinants of persistence in R&D and innovative activities. Among external/environmental factors, market dynamism affects R&D and innovation. Regarding firm specific characteristics, size and outsourcing also have a positive impact on both processes. Past innovative behaviour is clearly more decisive in explaining the current state of R&D and innovation activities than external factors or firm-level heterogeneity.