Innovation strategies as a source of persistent innovation

Abstract

An important topic in the recent literature on firms’ innovation is the question of whether, and to what extent, firms which innovate once have a higher probability of innovating again in subsequent periods. This phenomenon is called the “persistence of innovation.” Although the literature has established that innovation persistence is indeed important from an empirical point of view, relatively little attention has been paid to identifying the reasons why this is the case. In this article, we contribute to the literature by proposing that differences in innovation strategies across firms are an important driving force behind innovation persistence. We analyses this issue using a panel database constructed from R&D and Community Innovation Surveys in Norway. Empirical measures of five innovation strategies are identified by means of an inductive method: ad hoc, supplier based, market driven, R&D intensive and science based. A dynamic random effects probit model is used to estimate whether and to what extent these innovation strategies are a source of persistent innovation. The results support the idea that the differences in innovation strategies across firms are an important determinant of the firms’ probability to repeatedly innovate. More concretely, we found that firms pursuing the strategies “market driven,” “R&D intensive,” and “science based” were more likely to be persistent innovators. We also distinguish the effects of strategy differences on the persistence of product and process innovation in all firms, and within high-tech versus low-tech firms.

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