de Mel, Suresh, McKenzie, David and Woodruff, Christopher (2009) Innovative firms or innovative owners? Determinants of innovation in micro, small, and medium enterprises. Working Paper. Bonn, Germany: Institute for the Study of Labor (IZA). IZA Discussion Papers (No.3962). (Unpublished)

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Abstract

Innovation is key to technology adoption and creation, and to explaining the vast differences in productivity across and within countries. Despite the central role of the entrepreneur in the innovation process, data limitations have restricted standard analysis of the determinants of innovation to consideration of the role of firm characteristics. We develop a model of innovation which incorporates the role of both owner and firm characteristics, and use this to determine how product, process, marketing and organizational innovations should vary with firm size and competition. We then use a new large representative survey from Sri Lanka to test this model and to examine whether and how owner characteristics matter for innovation. The survey also allows analysis of the incidence of innovation in micro and small firms, which have traditionally been overlooked in the study of innovation, despite these firms comprising the majority of firms in developing countries. More than one quarter of microenterprises are found to be engaging in innovation, with marketing innovations the most common. As predicted by our model, firm size is found to have a stronger positive effect, and competition a stronger negative effect, on process and organizational innovations than on product innovations. Owner ability, personality traits, and ethnicity are found to have a significant and substantial impact on the likelihood of a firm innovating, confirming the importance of the entrepreneur in the innovation process.

Item Type:	Working or Discussion Paper (Working Paper)
Subjects:	H Social Sciences > HB Economic Theory H Social Sciences > HC Economic History and Conditions
Divisions:	Faculty of Social Sciences > Economics
Series Name:	IZA Discussion Papers
Publisher:	Institute for the Study of Labor (IZA)
Place of Publication:	Bonn, Germany
Official Date:	January 2009
Dates:	Date Event January 2009 UNSPECIFIED
Number:	No.3962
Number of Pages:	34
Institution:	University of Warwick
Status:	Not Peer Reviewed
Publication Status:	Unpublished
Access rights to Published version:	Open Access
Related URLs:	Publisher

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