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This paper studies the dynamic relationship between input and output of innovation in Dutch manufacturing using an unbalanced panel of enterprise data from five waves of the Com-munity Innovation Survey during 1994-2004. The authors estimate by maximum likelihood a dynamic panel data bivariate to bit with double-index sample selection accounting for individual effects. They find persistence of innovation input and innovation output, a lag effect of the former on the latter and a feedback effect of the latter on the former. The lag effect remains significant in the high-tech sector even after four years. Firm and industry effects are also important.
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