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Innovations, Prices and Employment: A Theoretical Model and an Empirical Application for West German Manufacturing Firms[Note 1. The paper is part of the research project ‘Growth ...]
Author(s) -
Smolny Werner
Publication year - 1998
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/1467-6451.00076
Subject(s) - german , competition (biology) , product (mathematics) , industrial organization , product market , manufacturing , empirical research , business , west germany , manufacturing sector , economics , labour economics , market economy , marketing , history , mathematics , archaeology , epistemology , economic history , biology , incentive , ecology , philosophy , geometry
In this paper a theoretical model of the impact of product and process innovations on output, capacity utilization, employment and prices is developed. The model is estimated with a unique set of micro‐data from West German manufacturing firms. The empirical results reveal that innovative firms are more successful. They show a higher utilization and more output and employment growth than non‐innovative firms. Innovations also change market behaviour. In sectors with a large share of product innovators, firms more often change employment and less often change prices, i.e. product innovations reduce price competition.