This paper tries to quantify the effect of diffusion of informal
knowledge on the innovative performance of European firms using data
derived from the 3rd Community Innovation Survey. When firms are asked
whether or not they have introduced new products or processes, they were
also asked to which degree such innovations were developed in-house.
These degrees were captured by the CIS variables InPdtW and InPcsW.
These variables ranged from 1 (Mainly done by the firm) to 3 (Mainly
done by other enterprises). The focus of this paper is to investigate
the impact of diffusion of informal knowledge. We combine the previous
variables with another variable which reflects firms that were not doing
any formal collaboration with other institutions. If an innovative firm
has no formal collaboration arrangements and the innovation has not been
done mainly by the firm, then diffusion of informal knowledge is
considered to be the main driver of the innovation.
The idea is that informal channels are accessible to all firms. This paper tries to quantify the impact of such flows of knowledge on firms’ innovation performance. To do this, a two step procedure is followed:
-In a first step, a latent variable for diffusion of informal knowledge is defined and estimated based on firms’ characteristics.
-In a second step, the latent diffusion variable is introduced as a regressor in a probit/tobit model.
Keywords: Knowledge flows, innovation, dynamic equations, sectoral innovation, CIS.
JEL: C34, O32, O31
UNU-MERIT Working Papers ISSN 1871-9872