Size, competition, and innovative activities: a developing world perspective
Abdul Waheed
#2011-052
The impact of size and competition on firm-level innovative activities
has obtained considerable attention in developed countries, but the
focus is still lacking in developing world. This paper is an attempt to
contribute in this direction by including 14 Latin American countries,
and by using Enterprise Survey data of the World Bank. We consider both
input and output innovation to observe the influence of firm size and of
market concentration on innovative activities, and to interrogate the
differences in influences of innovation determinants in different size
classes and competition statuses. Our analysis reveals that employment
increases the likelihood of R&D and product innovation, and its
influence on R&D expenditures is positive but at less than proportionate
rate. We find that product market competition increases the probability
of both R&D decision and innovation output, but it has no influence on
R&D intensity. We observe no relationship between R&D expenditures per
employee and product innovation. Country and industry differences also
contribute substantially towards firm-level R&D activities and product
innovation. Moreover, large or small firms do no tend to be advantageous
for employment and competition in order to influence R&D activities;
however, for product innovation, competition is a more significant
stimulus for large firms compared to small ones. Our results suggest
that firms' R&D productivity is independent of size classes and
competition environments. All of the determinants (of innovation) are
jointly observed to have different effects, for large and small firms,
as explanatory factors of both R&D intensity and product innovation, and
for different competition environments only for product innovation.
JEL classification: L11; L12; L13; O32
Keywords: R&D; Product innovation; Firm size; Product market competition