R&D Drivers in Young Innovative Companies

This paper examines the determinants of young innovative companies’ (YICs) R&D activitiestaking into account the autoregressive nature of innovation. Using a large longitudinal datasetcomprising Spanish manufacturing firms over the period 1990-2008, we find that previousR&D experience is a fundamental determinant for mature and young firms, albeit to a smallerextent in the case of the YICs, suggesting that their innovation behaviour is less persistentand more erratic. Moreover, our results suggest that firm and market characteristics play adistinct role in boosting the innovation activity of firms of different age. In particular, whilemarket concentration and the degree of product diversification are found to be important infostering R&D activities in the sub-sample of mature firms only, YICs’ spending on R&Dappears to be more sensitive to demand-pull variables, suggesting the presence of creditconstraints. These results have been obtained using a recently proposed dynamic type-2tobit estimator, which accounts for individual effects and efficiently handles the initialconditions problem....