Micro evidence for sources of innovation in European countries

This paper investigates sources of product or process innovation, such as investments in research and development, machinery, personnel training and management systems, by examining microdata from eight European countries. We pay particular attention to the effect of research and development in favouring the absorption of new technologies, i.e. the absorptive capacity. Significant positive effects of each source on both product and process innovations are found. Significant evidence of positive absorptive capacity emerges only in firms with low predicted probabilities of introducing innovation.