Loading... In-house R&D, external R&D and cooperation breadth in Spanish manufacturing firms

What is it about?

This study explores the nature of relationship between in-house R&D, external R&D and cooperation breadth and their joint impact on patent counts as well as technological, product and process, innovations in Spanish manufacturing firms. With regards to patent counts, empirical findings from a Generalized Method of Moments (GMM) estimator suggest a complementarity effect of internal and external R&D activities conditional on the breadth of R&D cooperation. Concerning technological innovation, results from dynamic random-effects probit models indicate no synergistic effects. In addition, we find evidence of persistence of all three innovation output measures. Our results suggest policy implications in relation to strengthening firms’ absorptive capacity that could have long-run effects.

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Why is it important?

A single argument brought forward in most empirical studies is that internal R&D capacity is critical for achieving complementary, synergistic effects from external knowledge sourcing (this is known as the absorptive capacity hypothesis). Given that Spain belongs to the Moderate innovators country group, absorptive capacity in Spanish firms is suboptimal in relation to technological aspects of innovation, thus suggesting a clear policy implication of providing public support aimed at strengthening firms’ internal innovation capacity. Equally important, given that absorptive capacity is path-dependent, policy makers should be aware that enhancing firms’ internal innovation capacity will have long-run effects on their innovation performance. Not only that absorptive capacity, as the key factor in firms’ innovation performance is path-dependent, but also innovation outputs, in particular product and process innovations. This true state dependence is reported in our studies (the mean duration of persistence of product and process innovation is three years), as in most previous studies. This suggests that, by promoting firms’ absorptive capacity, policy makers will, at the same time, promote the introduction of technological innovations in the medium run. In addition, the lack of evidence on complementarity in relation to technological aspects of innovation performance might suggest that public policies focusing on encouraging cooperation for innovation might not produce optimal results, unless firms’ absorptive capacity is large enough to successfully absorb and utilize external knowledge.