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Innovative activities and investment decision: evidence from European firms

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  • Oliviero A. Carboni

    (University of Sassari and CRENoS)

  • Giuseppe Medda

    (University of Sassari)

Abstract

This paper investigates the role of innovative activity and other micro determinants, on firms’ investment behaviour. The empirical analysis is based on a large representative and cross-country comparative sample of manufacturing firms across seven European countries during the global financial crisis 2007–2009. It is argued that innovative activities, measured either by an input variable (R&D) or by an output variable (innovative products sales), may boost additional investment in equipment and machinery. Given the significant share of firms which did not carry out any investment, a tobit procedure is adopted. Successively, in order to account for the potential simultaneity between investment decision and innovation activity variables, a seemingly unrelated regression equation methodology is applied. The results reveal that both R&D and innovative sales positively affect investment decisions, with the former having a stronger impact on investments, compared to the latter. The analysis also suggests that, after checking for a firm’s characteristics, firms in Germany and Spain are more likely to invest than those in France, Italy, and the UK.

Suggested Citation

  • Oliviero A. Carboni & Giuseppe Medda, 2021. "Innovative activities and investment decision: evidence from European firms," The Journal of Technology Transfer, Springer, vol. 46(1), pages 172-196, February.
    • Handle: RePEc:kap:jtecht:v:46:y:2021:i:1:d:10.1007_s10961-019-09765-6
    DOI: 10.1007/s10961-019-09765-6
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    More about this item

    Keywords

    R&D; Tangible investment; Firm behavior; SUR model;
    All these keywords.

    JEL classification:

    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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