Innovation and Competitive Advantage

Abstract

This paper examines the effects of the production of major innovations and patents on various measures of corporate performance. The analysis draws on panel data for 440 UK firms over the period 1972-1982. The observed direct effects of innovations on performance are relatively small. The paper also shows that little evidence can be found on innovation spillovers, associated with the production of either innovations or patents elsewhere in each firm's two-digit industry, raising performance. The benefits from innovation are more likely to be indirect, namely for user industries. However, innovative firms seem to be less susceptible to cyclical pressures than non-innovative firms. Firms in a competitive environment also seem more likely to engage in innovative activities than other firms ...

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