Markets and innovativeness: Does structure influence innovation performance?

This empirical analysis of a microeconomic dataset for the year 1992 and 833 Dutch industrial firms finds that innovativeness (i.e. the share of ?radically or completely new products? in turnover) is related to the length of the product life cycle, R&D intensity and technological opportunities at firm level. The Schumpeterian notion that entree barriers, market power and market concentration are important for innovativeness is contested by our findings as firm size, the concentration ratio, persistence of profit parameters, and entry and exit rates turn out to be insignificant. On average, knowledge protection by patenting reduces the firms? innovation performance whereas market-induced knowledge protection created by first mover advantages increases innovativeness at the firm level. Our investigation supports the notion of modern innovation theory that co-operation between suppliers, main producers and users improves firms? innovation performance.