Innovation and Demand in Industry Dynamics Ramp

Authors: Francesco Bogliacino Mario Pianta

Publish Date: 2013

Volume: , Issue: , Pages: 95-112

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Abstract

The links between three interconnected elements of the Schumpeterian sources of economic change are explored conceptually and empirically and related to the role played by demand factors First we examine the commitment of industries to invest profits in cumulative RD efforts second the ability of industries’ RD to introduce to new products in markets third the impact of new products on entrepreneurial profits We consider the nature and variety of innovative efforts—distinguishing in particular between strategies of technological and cost competiveness—and we introduce the role of demand in pulling technological change and supporting profits We develop a simultaneous threeequation model and we test it at industry level—for 38 manufacturing and service sectors—on six European countries over two time periods from 1994 to 2006 The results show that the model effectively accounts for the dynamics of European industries and highlights the interconnections between the different factors contributing to growth

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