The Innovation Threshold

E. Brouwer, T. Poot, K. van Montfort

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Abstract

In this paper, we propose an economic model to analyse the sales out of new products. This model accounts for the fact that even among firms for which R&D is a permanent activity, a fraction of firms does not have sales of innovative products during a two-year observation period. We propose a model in which the fixed costs of introduction is a major concern in the decision making process. In a structural model we estimate the fixed costs of the market introduction of new products and explain subsequent sales of innovative products. We examine an indicator of innovative output, i.e. sales of products 'new to the firm'. We estimate fixed costs thresholds using data from the Dutch part of the Community Innovation Survey (CIS) from 1998. R&D intensity, competition and market structure have a positive impact on sales of new products. The most important factors to decrease the fixed costs threshold of introduction are product related R&D investments, R&D subsidies and knowledge spillovers.
Original languageEnglish
Place of PublicationTilburg
PublisherTILEC
Number of pages28
Volume2007-008
Publication statusPublished - 2007

Publication series

NameTILEC Discussion Paper
Volume2007-008

Keywords

  • Innovation
  • Product R&D
  • Threshold model

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  • Cite this

    Brouwer, E., Poot, T., & van Montfort, K. (2007). The Innovation Threshold. (TILEC Discussion Paper; Vol. 2007-008). TILEC.