Internationalisation of firms and their innovation and productivity

^†The views expressed in this paper are purely those of the authors may not in any circumstances be regarded as stating an official position of the European Commission.

Figures & data

Table 1. Innovation performance in Ireland 2004–2008.

	% of firms with innovation activities
All firms	47.2
10–49 employees	42.7
50–249 employees	62.5
250+ employees	74.9
Foreign-owned	64.7
Irish-owned	43.0
2004–2006
% of total turnover that is	% of total persons engaged who		% of firms engaged in
generated by firms with innovation activities	work in firms with innovation activities	% of firms with innovation expenditure	co-operation for innovation activities	% of firms with innovation activities
75.1	68.0	34.1	27.0	44.9
39.3	46.4	29.2	22.1	40.1
74.4	65.5	49.7	35.7	61.4
90.0	80.1	67.8	53.8	76.0
84.4	76.3	43.6	35.2	60.7
59.5	62.5	31.7	24.0	41.3
2006–2008
% of total turnover that is	% of total persons engaged who work in	% of firms	% of firms engaged
generated by firms with innovation activities	firms with innovation activities	with innovation expenditure	in co-operation for innovation activities
64.6	65.9	31.4	24.1
36.8	42.5	26.5	20.0
71.1	63.6	47.8	30.2
72.3	79.0	64.3	48.6
76.8	79.8	39.0	32.6
47.9	56.8	29.6	21.2

Source: CIS 2004–2006, CSO Ireland (2009) and CIS 2006-2008, CSO Ireland (2010).

Table 2. Summary statistics of the panel sample: manufacturing and services.

CIS 2006 and 2008
	Innovators and non-innovators
Types of firms	N=723 All firms	N=245 Foreign-owned firms	N=282 Domestic exporters	N=196 non-exporters
1. Innovation input
Engagement in in-house R&D (per cent)	30.8	39.1	38.8	8.9
In-house R&D expenditure per employee (euro in 2004 price)	2722.7	4915.5	2504.6	307.3
Engagement in innovation (per cent)	44.5	53.0	52.3	22.9
Innovation expenditure per employee (euro in 2004 price)	6953.3	12,405.1	5484.8	2277.5
2. Innovation output
Any type of innovation (per cent)	64.7	77.3	68.6	43.3
Product innovation (per cent)	41.6	53.0	47.3	19.3
Process innovation (per cent)	41.6	50.9	45.0	24.9
Organisational innovation (per cent)	47.0	57.3	51.2	28.2
All types of innovation (per cent)	22.8	29.4	27.1	8.4
Product and process innovation (per cent)	27.6	36.0	31.9	10.9
Product and organisational innovation (per cent)	29.3	37.8	34.4	11.5
Process and organisational innovation (per cent)	31.5	39.5	35.8	15.3
Innovative turnover share (per cent)	10.0	13.4	11.8	3.1
3. Knowledge flows
Other enterprises within the same enterprise group (per cent)	11.6	24.7	6.0	3.3
Suppliers (per cent)	12.7	18.8	12.9	4.8
Clients or customers (per cent)	10.4	15.1	11.7	2.5
Competitors (per cent)	4.1	5.5	3.7	2.8
Consultants, commercial labs or private R&D institutes (per cent)	8.3	12.3	9.2	2.0
Universities or other higher education institutions (per cent)	8.2	13.9	8.0	1.5
Government or public research institutes (per cent)	4.6	5.7	6.4	0.8
4. Hampering factors
Lack of internal funds	13.8	10.4	17.9	12.0
Lack of external funds	8.7	5.1	11.9	8.7
Innovation costs too high	11.2	8.4	14.2	10.4
Lack of qualified personnel	7.1	6.1	9.0	5.6
Lack of technology information	2.8	1.6	3.9	2.8
Lack of market information	3.7	1.4	6.6	2.3
Difficulty to find co-operation partners for innovation	3.7	2.5	5.0	3.6
Market dominated by incumbents	13.9	1.4	15.8	10.7
Uncertain demand for innovative goods or services	11.6	8.8	15.2	9.9
Need to meet government regulation	8.9	7.6	8.3	11.2
Excessive economic risks	6.8	5.3	8.5	6.4
5. Other firm characteristics
Labour productivity (turnover per employee, 2004 prices)	738,219.0	1,430,688.0	459,804.0	276,155.2
Employees	153.3	238.9	130.9	79.1

Notes: Innovators are firms that report having at least one of the following types of innovation: product, process or organisational innovation. Firms reporting no innovation are considered non-innovators. Types of firms include: foreign-owned firms (as indicated in the original survey), domestic exporters (Irish-owned firms that export to Northern Ireland, the UK, the EU or other countries in the world) and domestic non-exporters (Irish-owned firms that do not export).

Table 3. Innovation input: manufacturing and services.

		Intensity of
	Propensity of investing	innovation input
	in innovation	Log of innovation
Dependent variable	Innovation expenditure >0	expenditure per employee
Estimator	Heckman first stage: Probit	Heckman second stage: OLS
Foreign-owned firm (lagged)	0.123*** (0.034)	0.345* (0.210)
Domestic exporter (lagged)	0.207*** (0.047)	−0.002 (0.183)
Size (lagged)	0.105*** (0.012)	−0.107** (0.051)
Human capital intensity (lagged)	0.116** (0.046)	0.413* (0.240)
Time fixed effect	0.038 (0.026)	−0.269* (0.140)
Lack of internal funds	0.151** (0.073)
Lack of external funds	−0.081 (0.077)
Costs too high	−0.093 (0.065)
Lack of qualified personnel	0.085 (0.071)
Lack of technology information	0.063 (0.096)
Lack of market information	−0.014 (0.086)
Difficulty to find co-operation partners	0.156* (0.090)
Market dominated by incumbents	0.043 (0.046)
Uncertain demand	0.078 (0.069)
Need to meet government regulation	0.149* (0.087)
Excessive economic risks	−0.022 (0.063)
Industry fixed effects	yes	yes
Wald test for joint significance (p-values)	0.000	0.000
Constant	yes	yes
Log likelihood	−3491.4
λ	0.039 (0.726)
ρ	0.027 (0.501)
Wald test for H0: ρ=0 (p-value)	0.000
N	1359

Notes: Figures reported in the table are marginal effects. Estimates are obtained from weighted regressions. Standard errors shown in parentheses are clustered at industry level (NACE rev. 1.1, 2-digit). The dependent variable of the propensity to invest in innovation equation is equal to 1 if a firm reports positive innovation expenditures and 0 otherwise. Foreign-owned firm, domestic exporter and obstacles to innovation are dummy variables. Size is measured as numbers of employees. Human capital intensity is defined as wages per employee. λ is the coefficient of the inverse mills ratio. ρ is the coefficient of the correlation of the error terms of the two equations measuring the interdependence of the two equations. OLS, ordinary least squares.

*Significant at the 10% level.

**Significant at the 5% level.

***Significant at the 1% level.

Table 4. Innovation output: manufacturing and services.

Dependent variable	Product innovation	Process innovation	Organisational innovation
Estimator	Probit	Probit	Probit
Panel A
Foreign-owned firm (lagged)	0.143** (0.066)	0.036 (0.056)	0.041(0.051)
Domestic exporter (lagged)	0.228*** (0.032)	0.053 (0.050)	0.051 (0.040)
Predicted innovation expenditure per employee	0.043 (0.131)	0.033 (0.094)	0.100 (0.075)
Size (lagged)	0.067*** (0.013)	0.093*** (0.015)	0.066*** (0.015)
Co-operation with other enterprises	0.089 (0.072)	0.090* (0.048)	0.132* (0.078)
Co-operation with suppliers	0.176*** (0.047)	0.200*** (0.077)	0.202*** (0.062)
Co-operation with customers	0.315*** (0.065)	0.101 (0.074)	−0.026 (0.064)
Co-operation with competitors	0.127 (0.140)	0.168* (0.102)	−0.002 (0.110)
Co-operation with consultants	−0.001 (0.098)	0.194** (0.090)	0.249*** (0.081)
Co-operation with universities	0.287*** (0.060)	0.277*** (0.094)	0.179** (0.084)
Co-operation with government	0.163 (0.138)	−0.068 (0.105)	0.251*** (0.093)
Time fixed effect	−0.063 (0.039)	0.039 (0.032)	0.016 (0.030)
Industry fixed effects	yes	yes	yes
Wald test for joint significance (p-values)	0.000	0.000	0.000
Constant	yes	yes	yes
Log-likelihood	−1413.8	−1488.2	−1512.9
Pseudo R^2	0.222	0.174	0.163
N	1356	1356	1356

Table 5. Labour productivity: manufacturing and services.

	Log of turnover per employee
	Product	Process	Organisational				All types of	Innovative
Dependent variable	innovation	innovation	innovation	innovation	innovation	innovation	innovation	turnover share
Estimator	OLS	OLS	OLS	OLS	OLS	OLS	OLS	OLS
Foreign-owned firm (lagged)	0.551*** (0.092)	0.558*** (0.089)	0.538*** (0.088)	0.576*** (0.088)	0.560*** (0.087)	0.546*** (0.086)	0.568*** (0.087)	0.527*** (0.093)
Domestic exporter (lagged)	0.163** (0.072)	0.180*** (0.064)	0.171**0.065)	0.194*** (0.065)	0.172** (0.064)	0.172** (0.063)	0.183*** (0.064)	0.147** (0.068)
Predicted innovation output	0.214 (0.151)	0.358* (0.194)	0.448** (0.190)	0.154(0.172)	0.360** (0.165)	0.488** (0.193)	0.328* (0.185)	0.055 (0.034)
Size (lagged)	0.138*** (0.030)	0.119*** (0.035)	0.121*** (0.034)	0.141*** (0.034)	0.127*** (0.033)	0.116*** (0.034)	0.131*** (0.033)	0.136*** (0.031)
Time fixed effect	0.019 (0.043)	−0.003 (0.046)	0.010 (0.045)	0.005 (0.045)	0.011 (0.045)	−0.002 (0.045)	0.001 (0.045)	0.025 (0.045)
Industry fixed effects	yes	yes	yes	yes	yes	yes	yes	yes
F-test for joint significance (p-values)	0.000	0.000	0.000	0.000	0.000	0.000	0.000	0.000
Constant	yes	yes	yes	yes	yes	yes	yes	yes
Log-likelihood	−1716.0	−1714.7	−1713.5	−1716.4	−1714.2	−1712.8	−1714.9	−1715.0
R^2	0.285	0.286	0.288	0.285	0.287	0.288	0.286	0.286
N	1330	1330	1330	1330	1330	1330	1330	1330

Notes: Figures reported in the table are marginal effects. Estimates are obtained from weighted regressions. Standard errors in parentheses are clustered at industry level (NACE rev. 1.1, 2-digit).

*Significant at the 10% level.

**Significant at the 5% level.

***Significant at the 1% level.

Table A1. List of variables.

Variable	Definition	Source
1. International activities
Foreign-owned firm	Dummy variable indicating whether a firm is foreign-owned (1) or not (0)	CIS
Domestic exporter	Dummy variable indicating whether a non-foreign-owned firm exports to Northern Ireland, the UK or other countries (1) or not (0)	CIS
2. Innovation input
Engagement in in-house R&D	Dummy variable indicating whether a firm reported a positive value of in-house R&D expenditure (1) or not (0)	CIS
In-house R&D expenditure per employee	The ratio of in-house R&D expenditure in constant prices over the number of employees	CIS
Engagement in innovation	Dummy variable indicating whether a firm reported a positive value of total innovation expenditure (1) or not (0)	CIS
Innovation expenditure per employee	The ratio of innovation expenditure in constant prices over the number of employees	CIS
3. Innovation output
Any type of innovation	Dummy variable indicating whether a firm reports having any type of innovation, namely product, process or organisational innovation (1) or not (0)	CIS
Product innovation	Dummy variable indicating whether a firm reports having product innovation (1) or not (0)	CIS
Process innovation	Dummy variable indicating whether a firm reports having process innovation (1) or not (0)	CIS
Organisational innovation	Dummy variable indicating whether a firm reports having organisational innovation (1) or not (0)	CIS
Product and process innovation	Dummy variable indicating whether a firm reports having both product and process innovation (1) or not (0)	CIS
Product and organisational innovation	Dummy variable indicating whether a firm reports having both product and organisational innovation (1) or not (0)	CIS
Process and organisational innovation	Dummy variable indicating whether a firm reports having both process and organisational innovation (1) or not (0)	CIS
All three types of innovation	Dummy variable indicating whether a firm reports having all three types of innovation, namely product, process and organisational innovation (1) or not (0)	CIS
Innovative turnover share	Percentage of turnover of innovative products in total turnover	CIS
4. Knowledge flows
Co-operation with other enterprises	Dummy variable indicating whether a firm co-operated with other enterprises within the same enterprise group (1) or not (0)	CIS
Co-operation with suppliers	Dummy variable indicating whether a firm co-operated with suppliers of equipment, material, components or software (1) or not (0)	CIS
Co-operation with customers	Dummy variable indicating whether a firm co-operated with clients or customers (1) or not (0)	CIS
Co-operation with competitors	Dummy variable indicating whether a firm co-operated with competitors or other enterprises in the same sector (1) or not (0)	CIS
Co-operation with consultants	Dummy variable indicating whether a firm co-operated with consultants, commercial labs or private R&D institutes (1) or not (0)	CIS
Co-operation with universities	Dummy variable indicating whether a firm co-operated with universities or other higher education institutions (1) or not (0)	CIS
Co-operation with government	Dummy variable indicating whether a firm co-operated with government or public research institutes (1) or not (0)	CIS
5. Other firm and industry characteristics
Labour productivity	Turnover per employee in constant prices	CSO
Employees	Number of employees	CSO
Human capital intensity	Wages per employee	CSO
6. Hampering factors to innovation
Dummy variable indicating whether a firm perceived the following factors as		CIS
having a high degree of importance in relation to innovation (1) or not (0):
Cost factors
Lack of internal funds
Lack of external funds
Innovation costs too high
Knowledge factors
Lack of qualified personnel
Lack of technology information
Lack of market information
Difficulty to find co-operation partners for innovation
Market factors
Market is dominated by incumbents
Uncertain demand
Need to meet government regulation
Excessive economic risks

CSO (Central Statistics Office) Ireland. 2009. Community Innovation Survey 2004–2006. Dublin: The Stationary Office.

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CSO (Central Statistics Office) Ireland. 2010. Community Innovation Survey 2006–2008. Dublin: The Stationary Office.

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