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INNOVATION COMPLEMENTARITY AND SCALE OF PRODUCTION *
Author(s) -
MIRAVETE EUGENIO J.,
PERNÍAS JOSÉ C.
Publication year - 2006
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/j.1467-6451.2006.00273.x
Subject(s) - complementarity (molecular biology) , industrial organization , economics , product innovation , econometrics , econometric model , production (economics) , tile , economies of scale , returns to scale , microeconomics , geography , genetics , biology , archaeology
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. Our approach is able to distinguish between complementarity and correlation induced by unobserved heterogeneity. We apply the model to analyze the Spanish ceramic tile industry where the adoption of the single firing furnace in the 1980's facilitated the introduction of new product designs as well as opening new ways of organizing production. Our econometric results show that there is significant complementarity between product and process innovation. Small firms tend to be more innovative overall.