#2017-035 Is the demand-pull driver equally crucial for product vs process innovation?
Herbert Dawid, Gabriele Pellegrino & Marco Vivarelli
Is the demand-pull driver equally crucial for product vs process innovation?
While the extant innovation literature has provided extensive evidence
of the so-called "demand-pull" effect, the possible diverse impact of
demand evolution on product vs process innovation activities has not
been yet investigated. This paper develops a formal model predicting a
larger inducing impact of past sales in fostering product rather than
process innovation. This prediction is then tested through a dynamic
microeconometric model, controlling for R&D persistence, sample
selection, observed and unobservable individual firm effects and time
and sectoral peculiarities. Results are consistent with the model and
suggest that an expansionary economic policy may benefit the diffusion
of new products or even the emergence of entire new sectors.
JEL Classification: O31
Keywords: technological change, R&D, demand-pull innovation, dynamic two tobit