Persistence and ability in the innovation decisions

This paper explores the effect of persistence and manager ability in the decision to conduct product and process innovations. Managers make strategic decisions about the implementation of a better innovation activity in order to improve their firm’s performance in the market. Many empirical studies have analysed the determinants of the innovation process, but few have considered the effect of experience (the firm’s capacities and routines of organization) and the manager’s ability (skills and capability) as relevant elements. Our aim is to demonstrate the importance of these elements using typical discrete-choice specifications and binary choice models with heterogeneity. We do so in an extensive database that provides information about Spanish manufacturing firms. Our message is that persistence, however measured, is the main determinant of any innovation activity. The experience effect is important in both product and process innovation decisions but the results differ in degree: The experience gained from engaging in process innovations appears to increase the probability of process innovation success, whereas the experience gained from product innovation activity, although important, leaves place to other factors determining product innovation success. Once a firm has a commitment to innovation activity, develops some innovation routines, and learns about the innovation process, it reaches a turning point at which other factors play a less prominent role.