Product Innovation by Incumbent Firms in Developing Economies : The Roles of Research and Development Expenditures, Trade Policy, and the Investment Climate
A model of firm innovation illustrates the effects of the threat of imitation and product varieties on a representative firm's decision to invest in research and development to produce new product varieties. The model motivates two empirical q...
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| Language: | English |
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Washington, DC: World Bank
2012
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| Online Access: | http://documents.worldbank.org/curated/en/2008/08/10064236/product-innovation-incumbent-firms-developing-economies-roles-research-development-expenditures-trade-policy-investment-climate http://hdl.handle.net/10986/6299 |
| Summary: | A model of firm innovation illustrates
the effects of the threat of imitation and product varieties
on a representative firm's decision to invest in
research and development to produce new product varieties.
The model motivates two empirical questions: (1) Is research
and development partially correlated with firms'
propensity to introduce new products or product innovation
in developing countries? (2) Do trade policies and the
national investment climate affect firms' propensity
for product innovation? The econometric evidence suggests
that the answers are yes and yes, but the investment climate
affects product innovation in a manner that is consistent
with the presence of market failures and state capture.
National trade-policy distortions appear to reduce the
probability of product innovation, and the density of
exporting firms at the national level also seems to
positively affect the propensity to introduce new products
by individual firms. The paper discusses some policy implications. |
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