The persistence of innovation: the italian evidence

This paper contributes the analysis of the persistence of innovation activities, as measured by total factor productivity (TFP) and explores its path pendent caracteristics. The empirical analysis of firm level TFP for a sample of 7020 Italian manufacturing companies observed during the years1996-2005 confirms that firms that have been able to improve the general efficiency of their production process at time t are likely to keep innovating in the following periods of time, more than firms that never innovated before. The empirical analysis is based on both transition probability matrixes and on dynamic discrete choice panel data models. The evidence suggests that innovation persistence is path dependent, as opposed to past dependent. The dynamics of the process in fact is typically non-ergodic, yet it is not exclusively determined by its but is shaped by a number of complementary and contingent factors origins that affect locally the sequence of the hysteretic effects of the early state dependence.