How do new entrepreneurs innovate?

This paper analyses the determinants of product innovation in Italian young innovative companies (YICs) by looking at in-house and external R&D and at the acquisition of external technology in its embodied and disembodied components. A Tobit approach is applied to study jointly the occurrence of product innovation and the intensity of such innovation. Results provide evidence that in-house R&D is linked to product innovation both in mature firms and YICs; however, YICs turn out to be less in-house R&D-based and more dependent on external sources of knowledge. Moreover, other entrepreneurial attitudes such as the ability to cooperate with other firms in producing innovation or the capacity to develop significant organizational changes appear to be less important or even absent in Italian YICs. These results are somehow worrying, since they show that Italian innovative entrepreneurs are mostly driven by routinized rather than creative strategies.