Title: The hidden effect of innovation on the growth of Spanish firms

Authors: Manuel Ángel Nogueira; Sara Fernández-López; María Jesús Rodríguez Gulías; Milagros Vivel-Búa; David Rodeiro-Pazos

Addresses: Finance and Accounting Department, Universidade de Santiago de Compostela, Avda. do Burgo, s/n., 15782, Santiago de Compostela, Galicia, Spain ' Finance and Accounting Department, Universidade de Santiago de Compostela, Avda. do Burgo, s/n., 15782, Santiago de Compostela, Galicia, Spain ' Finance and Accounting Department, Universidade da Coruña, Campus Elviña, 15701, A Coruña, Galicia, Spain ' Finance and Accounting Department, Universidade de Santiago de Compostela, Avda. do Burgo, s/n., 15782, Santiago de Compostela, Galicia, Spain ' Finance and Accounting Department, Universidade de Santiago de Compostela, Avda. do Burgo, s/n., 15782, Santiago de Compostela, Galicia, Spain

Abstract: Since the studies of Schumpeter (1939), Solow (1957), or Nelson and Sidney (1982), innovation has been considered one of the major drivers of economic growth. This paper explores the relationship between firms' innovation and sales growth. Using an original dataset of 80 listed Spanish firms over the period 2004-2014, we firstly apply a panel data fixed effects estimator. However, since growth rates follow a Laplace distribution, we also employ panel data quantile regressions to overcome the problems of regression techniques focused on the 'average' firm. Additionally, we consider a rich set of innovation and firm-specific variables that help mitigating standard omitted variable bias. Our results show that R&D expenditures influence sales growth, but the effect seems to be due to tax benefits, rather than expected innovation outcomes. In contrast, the market value of patents is undoubtedly related to firm growth, although high-growth firms capture larger benefits.

Keywords: innovation; growth; Spain; panel data; quantile regressions; R&D expenditures; patents; R&D intensity; financial performance.

DOI: 10.1504/IJESB.2019.100103

International Journal of Entrepreneurship and Small Business, 2019 Vol.37 No.2, pp.167 - 189

Received: 14 Dec 2016
Accepted: 19 May 2017
Published online: 09 Jun 2019 *

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