Determinants of the Probability to Innovate: Evidence from Ukrainian Firms

Year 2024, Volume: 25 Issue: 2, 309 - 320, 30.04.2024

Bayram Veli Doyar

https://doi.org/10.37880/cumuiibf.1430158

Abstract

This study examines the factors affecting the probabilities of firms to innovate by considering Ukraine, which is at war with Russia. When the country’s basic economic indicators and innovation indicators are examined, it is seen that it exhibits a low performance. A firm-level dataset from 2019 is used for the analysis and two probit models based on the knowledge production function are used. These models are estimated by the maximum likelihood method. The reason why the probit model is preferred is that the dependent variables are dummy variables. The findings reveal that the increase in the number of employees and R&D expenditures per employee positively affects product innovation. It is observed that firms whose main market is international are less likely to make product innovations than firms whose main market is local. Having a website reduces the probability of process innovation, and firms whose main market is national are less likely to innovate than firms whose main market is local. Finally, R&D expenditure per worker does not have a significant impact on process innovation. The study suggests that Ukraine could focus on increasing employment and R&D expenditure at the firm level to enhance innovation. It is also emphasized that firms need to adapt to both national and international markets. However, due to the ongoing conflict with Russia, the resources allocated to these policies may have been directed to financing the war. This may make it difficult to implement these policy recommendations.

Keywords

firm, innovation, knowledge production function, R&D

İnovasyon Yapma Olasılığının Belirleyicileri: Ukrayna Firmaları Örneği

Abstract

Bu çalışma, Rusya ile savaş halinde olan Ukrayna’yı ele alarak firmaların inovasyon (yenilik) yapma olasılıklarını etkileyen faktörleri incelemektedir. Ülkeye ait temel ekonomik göstergeler ve inovasyon göstergeleri incelendiğinde düşük bir performans sergilediği görülmektedir. Analiz için 2019 yılına ait firma düzeyinde bir veri setinden yararlanılmakta olup bilgi üretim fonksiyonuna dayanan iki probit modeli kullanmaktadır. Bu modeller maksimum olabilirlik yöntemi ile tahmin edilmektedir. Probit modelinin tercih edilme sebebi bağımlı değişkenlerin kukla değişken olmalarıdır. Bulgular, çalışan sayısındaki ve çalışan başına Ar-Ge harcamalarındaki artışın ürün inovasyonunu olumlu yönde etkilediğini ortaya koymaktadır. Ana pazarı uluslararası olan firmaların ise ürün yeniliği yapma olasılıklarının ana pazarı yerel olan firmalarınkinden daha düşük olduğu gözlenmektedir. Bir web sitesine sahip olmak süreç yeniliği olasılığını azaltmaktadır ve ana pazarı ulusal olan firmaların süreç yeniliği yapma olasılıkları ana pazarı yerel olan firmalarınkinden daha düşüktür. Son olarak işçi başına Ar-Ge harcaması süreç yeniliği yapma açısından anlamlı bir etki doğurmamaktadır. Çalışma, Ukrayna’nın inovasyonu geliştirmek için firma düzeyinde istihdamı ve Ar-Ge harcamalarını artırmaya odaklanabileceğini öne sürmektedir. Ayrıca firmaların hem ulusal hem de uluslararası pazarlara uyum sağlamalarının gerekliliği vurgulanmaktadır. Ancak Rusya ile devam eden çatışma nedeniyle bu politikalara ayrılacak kaynaklar savaşın finansmanına yönlendirilmiş olabilir. Bu da bahsi geçen politika önerilerinin uygulanmasını zorlaştırabilir.

Keywords

Ar-Ge, bilgi üretim fonksiyonu, inovasyon, firma, yenilik

Ethical Statement

Bu makale orijinal olup daha önce başka bir yerde yayınlanmamıştır ve başka bir yerde veya başka bir dilde yayınlanmak üzere değerlendirmede değildir. Beyan edilecek bir çıkar çatışması mevcut değildir.

References

• Abdu, M., & Jibir, A. (2018). Determinants of firms innovation in Nigeria. Kasetsart Journal of Social Sciences, 39(3), 448-456. https://doi.org/10.1016/j.kjss.2017.07.006
• Aboal, D., & Garda, P. (2016). Technological and non-technological innovation and productivity in services vis-à-vis manufacturing sectors. Economics of Innovation and New Technology, 25(5), 435-454. https://doi.org/10.1080/10438599.2015.1073478
• Adeyeye, A. D., Jegede, O. O., Oluwadare, A. J., & Aremu, F. S. (2016). Micro-level determinants of innovation: Analysis of the Nigerian manufacturing sector. Innovation and Development, 6(1), 1-14. https://doi.org/10.1080/2157930X.2015.1047110
• Aldieri, L., Barra, C., Paolo Vinci, C., & Zotti, R. (2021). The joint impact of different types of innovation on firm’s productivity: Evidence from Italy. Economics of Innovation and New Technology, 30(2), 151-182. https://doi.org/10.1080/10438599.2019.1685211
• Becker, B. (2015). Public R&D policies and private R&D investment: A survey of the empirical evidence. Journal of Economic Surveys, 29(5), 917-942. https://doi.org/10.1111/joes.12074
• Ben Khalifa, A. (2023). Impact of research and development (R&D) and information, and communication technology (ICT) on innovation and productivity evidence from Tunisian manufacturing firms. Economics of Transition and Institutional Change, 31(2), 341-361. https://doi.org/10.1111/ecot.12340
• Benavente, J. M. (2006). The role of research and innovation in promoting productivity in Chile. Economics of Innovation and New Technology, 15(4-5), 301-315. https://doi.org/10.1080/10438590500512794
• Bhattacharya, M., & Bloch, H. (2004). Determinants of innovation. Small Business Economics, 22, 155-162.
• Calof, J. L., & Beamish, P. W. (1995). Adapting to foreign markets: Explaining internationalization. International Business Review, 4(2), 115-131. https://doi.org/10.1016/0969-5931(95)00001-G
• Castellacci, F. (2011). How does competition affect the relationship between innovation and productivity? Estimation of a CDM model for Norway. Economics of Innovation and New Technology, 20(7), 637-658. https://doi.org/10.1080/10438599.2010.516535
• Crépon, B., Duguet, E., & Mairesse, J. (1998). Research, innovation and productivity: An econometric analysis at the firm level. Economics of Innovation and New Technology, 7(2), 115-158. https://doi.org/10.1080/10438599800000031
• Deng, Z., Jean, R.-J. ‘Bryan’, & Sinkovics, R. R. (2012). Determinants of international innovation performance in Chinese manufacturing firms: An integrated perspective. Asian Business & Management, 11(1), 31-55. https://doi.org/10.1057/abm.2011.26
• Edeh, J. N., & Acedo, F. J. (2021). External supports, innovation efforts and productivity: Estimation of a CDM model for small firms in developing countries. Technological Forecasting and Social Change, 173, 121189. https://doi.org/10.1016/j.techfore.2021.121189
• Ellyatt, H. (2022, Şubat 24). Russian forces invade Ukraine. CNBC. https://www.cnbc.com/2022/02/24/russian-forces-invade-ukraine.html
• Ernst, E., Merola, R., & Reljic, J. (2022). Labour market policies for inclusiveness: A literature review with a gap analysis (78). ILO Working Paper. https://doi.org/10.54394/SEPQ5405
• Fernández-Sastre, J., & Montalvo-Quizhpi, F. (2019). The effect of developing countries’ innovation policies on firms’ decisions to invest in R&D. Technological Forecasting and Social Change, 143, 214-223. https://doi.org/10.1016/j.techfore.2019.02.006
• Gallié, E.-P., & Legros, D. (2012). Firms’ human capital, R&D and innovation: A study on French firms. Empirical Economics, 43(2), 581-596. https://doi.org/10.1007/s00181-011-0506-8
• Griffith, R., Huergo, E., Mairesse, J., & Peters, B. (2006). Innovation and productivity across four European countries. Oxford Review of Economic Policy, 22(4), 483-498. https://doi.org/10.1093/oxrep/grj028
• Hall, B. H., Lotti, F., & Mairesse, J. (2013). Evidence on the impact of R&D and ICT investments on innovation and productivity in Italian firms. Economics of Innovation and New Technology, 22(3), 300-328. https://doi.org/10.1080/10438599.2012.708134
• Hussen, M. S., & Çokgezen, M. (2021). Relationship between innovation, regional institutions and firm performance: Micro-evidence from Africa. African Journal of Science, Technology, Innovation and Development, 14(2), 316-332. https://doi.org/10.1080/20421338.2020.1866148
• Kahn, A., Sithole, M., & Buchana, Y. (2022). An analysis of the impact of technological innovation on productivity in South African manufacturing firms using direct measures of innovation. South African Journal of Economics, 90(1), 37-56. https://doi.org/10.1111/saje.12310
• Keraga, M. N., & Araya, M. (2022). R&D, innovations, and firms’ productivity in Ethiopia. African Journal of Science, Technology, Innovation and Development, 1-14. https://doi.org/10.1080/20421338.2022.2088046
• Lee, S., Nam, Y., Lee, S., & Son, H. (2016). Determinants of ICT innovations: A cross-country empirical study. Technological Forecasting and Social Change, 110, 71-77. https://doi.org/10.1016/j.techfore.2015.11.010
• Lööf, H., & Heshmati, A. (2002). Knowledge capital and performance heterogeneity: A firm-level innovation study. International Journal of Production Economics, 76, 61-85.
• Mairesse, J., Mohnen, P., & Kremp, E. (2005). The importance of R&D and innovation for productivity: A reexamination in light of the French innovation survey. Annales d’Économie et de Statistique, 79/80, 487. https://doi.org/10.2307/20777586
• Masso, J., & Vahter, P. (2008). Technological innovation and productivity in late-transition Estonia: Econometric evidence from innovation surveys. The European Journal of Development Research, 20(2), 240-261. https://doi.org/10.1080/09578810802060751
• Ministry of Foreign Affairs of Ukraine. (2019, Aralık 19). 10 facts you should know about Russian military aggression against Ukraine. https://mfa.gov.ua/en/10-facts-you-should-know-about-russian-military-aggression-against-ukraine
• OECD. (2015). Frascati Manual 2015: Guidelines for collecting and reporting data on research and experimental development. OECD. https://doi.org/10.1787/9789264239012-en
• OECD & Eurostat. (2018). Oslo manual 2018: Guidelines for collecting, reporting and using data on innovation (4. bs). OECD. https://doi.org/10.1787/9789264304604-en
• Pakes, A., & Griliches, Z. (1984). Patents and R&D at the firm level: A first look. Içinde Z. Griliches (Ed.), R&D, Patents, and Productivity (ss. 55-72). The University of Chicago Press.
• Pavitt, K. (1986). ‘Chips’ and ‘trajectories’: How does the semiconductor influence the sources and directions of technical change? İçinde R. MacLeod (Ed.), Technology and the Human Prospect. Frances Pinter.
• Ramírez, S., Gallego, J., & Tamayo, M. (2020). Human capital, innovation and productivity in Colombian enterprises: A structural approach using instrumental variables. Economics of Innovation and New Technology, 29(6), 625-642. https://doi.org/10.1080/10438599.2019.1664700
• Romer, P. M. (1990). Endogenous technological change. Journal of Political Economy, 98(5, Part 2), S71-S102.
• Sánchez-Sellero, P., & Bataineh, M. J. (2022). How R&D cooperation, R&D expenditures, public funds and R&D intensity affect green innovation? Technology Analysis & Strategic Management, 34(9), 1095-1108. https://doi.org/10.1080/09537325.2021.1947490
• Schumpeter, J. A. (2003). Capitalism, socialism, and democracy. Routledge.
• Tello, M. D. (2015). Firms’ innovation, public financial support, and total factor productivity: The case of manufactures in Peru. Review of Development Economics, 19(2), 358-374. https://doi.org/10.1111/rode.12147
• United Nations Statistics Division. (2002). International Standard Industrial Classification of All Economic Activities (ISIC) Revision 3.1. United Nations. https://unstats.un.org/unsd/publication/seriesm/seriesm_4rev3_1e.pdf
• Vakhitova, G., & Pavlenko, T. (2010). Innovation and productivity: A firm level study of Ukrainian manufacturing sector (DP#27). Kyiv School of Economics & Kyic Economics Institute.
• Wadho, W., & Chaudhry, A. (2022). Innovation strategies and productivity growth in developing countries: Firm-level evidence from Pakistani manufacturers. Journal of Asian Economics, 81, 101484. https://doi.org/10.1016/j.asieco.2022.101484
• Waheed, A. (2017). Innovation and Firm-Level Productivity: Evidence from Bangladesh. The Developing Economies, 55(4), 290-314. https://doi.org/10.1111/deve.12152
• Wakasugi, R., & Koyata, F. (1997). R&D, firm size and innovation outputs: Are Japanese firms efficient in product development? Journal of Product Innovation Management, 14(5), 383-392. https://doi.org/10.1111/1540-5885.1450383
• World Bank. (2023a). Official exchange rate (LCU per US$, period average) [PA.NUS.FCRF] [dataset]. https://databank.worldbank.org/reports.aspx?source=world-development-indicators#
• World Bank. (2023b, Aralık 18). World Development Indicators. GDP per capita growth (annual %); Inflation, consumer prices (annual %); Patent applications, nonresidents; Patent applications, residents; Research and development expenditure (% of GDP); Researchers in R&D (per million people); Unemployment, total (% of total labor force) (modeled ILO estimate); Population (total). https://databank.worldbank.org/reports.aspx?source=world-development-indicators
• World Bank. (t.y.). World Bank Country and Lending Groups. Historical Classification by income in XLSX format. https://datahelpdesk.worldbank.org/knowledgebase/articles/906519-world-bank-country-and-lending-groups
• World Bank Group, EBRD, & EIB. (2020). Enterprise Survey 2019: Ukraine [dataset]. https://doi.org/10.48529/f6ns-wn39
• Younas, M. Z., & Ul Husnain, M. I. (2022). Role of market structure in firm-level innovation: An extended CDM model for a developing economy. DECISION, 49(1), 91-104. https://doi.org/10.1007/s40622-022-00303-2