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Discussion Paper Details

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Title: Innovation Complimentarity and Scale of Production

Author(s): Eugenio J Miravete and Jose C Pern�as

Publication Date: July 2004

Keyword(s): complementarity, process innovation, product innovation, supermodularity and unobserved heterogeneity

Programme Area(s): Industrial Organization

Abstract: This Paper is an empirical study on the existence of complementarity between product and process innovation. We present an econometrically feasible model that uses the information contained in the innovation profile of each firm to test for the existence of complementarity among production and innovation strategies. We apply the model to analyse the Spanish ceramic tiles industry where the adoption of the single firing furnace in the 1980s facilitated the introduction of new product designs as well as to opening new ways of organizing production. Our econometric results show that there is significant complementarity between product and process innovation. We are able to separate the nature of complementarity relationships and thus, our results show that both intrinsic ? technologically driven ? and induced complementarity ? due to firms unobserved heterogeneity ? are significant. Small firms tend to be more innovative overall.

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Bibliographic Reference

Miravete, E and Pern�as, J. 2004. 'Innovation Complimentarity and Scale of Production'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=4483