Innovation Complementarity and Scale of Production*

Abstract

We present an econometrically feasible model that uses the information contained in the innovation profile of each firm to test for the existence of complementarity among production and innovation strategies. Our approach is able to distinguish between complementarity and correlation induced by unobserved heterogeneity. We apply the model to analyze the Spanish ceramic tiles industry where the adoption of the single firing furnace in the 1980s facilitated the introduction of new product designs as well as to opening new ways of organizing production. Our econometric results show that there is significant complementarity between product and process innovation. Small firms tend to be more innovative overall.

Drivers and impacts in the globalization of corporate R&D: an introduction based on the European experience

“…In fact, the internationalization of R&D activities -involving the setting up of research facilities abroad -not only helps firms to access complementary expertise, but also allows firms to be closer to markets where the fruits of their R&D can be exploited. By the same token, foreign R&D activities may provide access to foreign technologies and therefore can represent a channel for transferring knowledge back to the home country (Miravete and Pernias, 2006). …”

A note on testing for complementarity and substitutability in the case of multiple practices

“…This is the case of substitutability (or subadditivity). Examples of studies of complementarity are the relationships between human resource practices and firm strategy (Ichniowski et al 1997), firms' internal R&D and external technology sourcing (Arora and Gambardella 1990), process and product innovation (Miravete and Pernias 2004), labor skill and innovation strategies (Leiponen 2005), different government innovation policies (Mohnen and Röller 2005), information technology, workplace reorganization, and new product and service innovations (Black and Lynch 2001;Bresnahan et al 2002;Caroli and Van Reenen 2001), adoption of different information technologies in emergency health care (Athey and Stern 2002), different types of labor in the determination of trade patterns (Grossman and Maggi 2000) and use of external knowledge across different stages of new product development (Love and Roper 2009). …”

The Antecedents and Innovation Consequences of Organizational Search: Empirical Evidence for Spain

“…In the context of this study, choice equations (2) characterize the process of self-selection by considering the observable (i.e., the firm's ACAP) and unobservable factors (given by ℓ ji ) that affect firms' search choices. In this way, we correct for endogeneity while estimating parameters γ j , which has been described as a recurring problem in previous studies on complementarities (e.g., Athey and Stern, 1998;Leiponen, 2005;Miravete and Pernias, 2006;Cassiman and Veugelers, 2006). Table 3 shows the results for the estimates of both the outcome (first column) and choice equations (the remaining columns).…”