The impact of product innovation on firm growth using a multi-stage modelevidence in a period of economic crisis

  1. Pablo Garrido Prada 1
  2. Desiderio Romero Jordán 2
  3. Maria Jesús Delgado Rodriguez 2
  1. 1 Universidad Autónoma de Madrid
    info

    Universidad Autónoma de Madrid

    Madrid, España

    ROR https://ror.org/01cby8j38

  2. 2 Universidad Rey Juan Carlos
    info

    Universidad Rey Juan Carlos

    Madrid, España

    ROR https://ror.org/01v5cv687

Journal:
Notas técnicas: [continuación de Documentos de Trabajo FUNCAS]

ISSN: 1988-8767

Year of publication: 2018

Issue: 796

Type: Working paper

More publications in: Notas técnicas: [continuación de Documentos de Trabajo FUNCAS]

Abstract

The period of economic crisis started in late 2008 meant a change in the conditions of the environment, reducing the number of innovative companies as well as investment in innovation. An adverse macroeconomic environment can also determine the outputs of innovation and its effect on firm growth. The objective of the article is therefore (i) to analyze the determinants of innovation output and (ii) to examine how these outputs influences firm growth during a period of economic crisis. For this purpose, we used a panel of Spanish firms during the period 2005-2013, employing a sequential multi stage approach based on four phases: decision to innovate, how much innovate, innovation outputs and finally, the effect of these innovations on firm growth. The results confirm that for the period of economic crisis, investment in innovation remains decisive for generating innovations outputs, albeit with a slightly smaller effect. In contractive periods, both previous experience and continuous activities of intramural R&D are two fundamental factors to generate outputs from innovations. In any case, the positive effect of innovation outputs on firm growth is reduced by half in times of crisis. The results imply that companies must recalculate the opportunity cost of innovation, given that both previous experience in innovation and a continued effort in R&D can reduce the negative effects of contractionary macroeconomic periods on innovation.