Persistence of innovative activities in times of crisis: the case of the Basque Country

ABSTRACT

By drawing on a large sample of Spanish manufacturing and service sector firms, the changes in firms’ innovation expenditures that have taken place since the onset of the 2008 economic crisis are analysed, as is the relationship between such changes and the location of the company. Special focus is placed on firms in the Basque Country. Compared to other Spanish regions, the Basque Country differs in terms of its fiscal status, its earlier experience of crises, its innovation performance and its greater focus on innovation-related policies. Our results show that the impact of the crisis on firms’ innovation expenditures in the Basque Country has indeed differed from that in comparable Spanish regions. Even after controlling for sectoral differences and for detailed characteristics at the firm level, firms with R&D employment in the Basque Country showed a significantly lower probability of abandoning innovation activities and even a somewhat higher probability of increasing their innovation efforts. This regional effect is especially significant for small and medium-sized enterprises.

KEYWORDS:

• Regions
• innovation investment
• economic crisis
• resilience

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Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. http://epp.eurostat.ec.europa.eu/portal/page/portal/science_technology_innovation/introduction

2. Note, however, that our main results are unchanged when we include these firms in our analysis. In this case, firms that did not report R&D employees in 2008 but had innovation expenditure in the years between 2004 and 2008 are included in the control group.

3. Industry dummies are included based on the sector aggregation provided in PITEC, which is an aggregation of the CNAE (the Spanish acronym for Spain's National Classification of Economic Activities) classification of 44 sectors.

4. Marginal effects (dy/dx) are computed as sample means. For dummy variables, the marginal effect corresponds to the discrete change from 0 to 1.

5. Small firms are defined as those with fewer than 50 employees, medium-sized firms are those with 50–200 employees and large firms are defined as those with 200 or more employees.

Additional information

Funding

The authors gratefully acknowledge the financial support of the Spanish Ministry of Science and Innovation (ECO2010-17485 and ECO2013-41317-R). An earlier version of this paper has been a finalist in the 2015 UAM-Accenture Award for outstanding articles in the field of economics and innovation management.