Interdependence and spillovers: is firm performance affected by others' innovation activities?

Pedro de Faria (1) , Francisco Lima (2, 3)

1 Department of Innovation Management and Strategy, Faculty of Economics and Business
2 Department of Engineering and Management
3 CEG - IST - Center for Management Studies, Instituto Superior Técnico [Porto Salvo]

The creation of new knowledge is a case in which agents' behaviour can affect the performance of other actors positively, given that new knowledge creates positive externalities in the market. In this context, we investigate the existence of performance spillovers associated with innovation activities by quantifying the innovation produced in surrounding firms and controlling for the fact that a firm is itself an innovation producer. We use data from the Third Community Innovation Survey that measures innovation in a broad way, not reducing it to R&D and patents, which departs from previous literature on spillovers. Furthermore, to tackle the endogeneity of the innovation variables on the firm production decision, we resort to the firm intellectual property protection methods as an instrument. We found a positive spillover of innovation on firm value added. The results also show that process innovation spillovers are more prevalent than product innovation spillovers.

Mots clés: Social Sciences & Humanities

Domaines: Économie et finance quantitative [q-fin]

Pedro de Faria, Francisco Lima. Interdependence and spillovers: is firm performance affected by others' innovation activities?. Applied Economics, 2011, 44 (36), pp.4765-4775. ⟨10.1080/00036846.2011.560108⟩. ⟨hal-00730231⟩