National Technological Capabilities and Innovation Performance Krzysztof Szczygielski CASE & Lazarski School EACES workshop, 10. April 2010, Moscow

Definitions (in this paper)  National technological capabilities  characteristics of the economic and social system that determine a country’s ability to implement and develop new technologies  in particular: knowledge, skills, infrastructure  cf. Fagerberg, Srholec, Verspagen (2010)  Innovation performance  The intensity of introduction of new product and processes by the firms (new to the firm)

Why a study of innovation performance?  Innovation activity is a key element of technological progress  The inferior performance of Eastern Europe

Why a study of national capabilities?  Contribution to the empirical literature  Several studies have examined the relationship between technological capabilities and innovation growth  But the hypothesized channel (i.e. innovations) remains unexplored  Interesting from the theoretical perspective  Policy relevance  National technological capabilities relatively easily addressed by policy measures

Research questions Are there diminishing innovation returns to national technological capabilities? (hypothesis justified by the National Innovation System approach) Is inferior innovation performance of Eastern Europe explained by lower technological capabilities?

Research methodology  Generally speaking: regression of the share of innovating manufacturing firms on various measures of national and sectoral technological capabilities.  Dataset  Estimation strategy

Methodology: Data Dependent variable: share of firms that introduced a process or a product innovation in 2006 (Community Innovation Survey: 28 countries x 23 two-digit NACE industries) Independent variables: innovation capabilities  Knowledge  GERD as % of GDP  Applications to the EPO per 1000 inhabitants  Firm expenditure on R&D over sales (industry-level data)  Number of citations (minus self-citation) per an average paper (data from Scopus)  Skills  Number of engineers and scientists per 1000 employed  Pseudo-skill-intensity (industry-level data)  Infrastructure  Broadband penetration rate  Price of a standard telecommunication service  Also necessary: average life expectancy in the country (data from the CIA handbook)

Methodology: estimation strategy estimated by a Tobit regression Three models:

Results (*)

Results (**)

Results (** for country subsets)

Results (***)

Conclusions  National technological capabilities (NTC) are a significant factor of industry-level innovation performance  Evidence on diminishing innovation returns is mixed and depends on the subset of countries and on the measure of technological capability  Differences in NTC cannot explain the entire East-West innovation gap

Next stage  More periods (previous CISs)  Better handle of the collinearity and endogeneity problems  Extension to service industries?