Working Papers

Innovation and R&D Investment of Tunisian Firms: A Two-Regime Model with Selectivity Correction

No.

484

Publisher

Economic Research Forum (ERF)

Date

April, 2009

Topic

D. Microeconomics

Abstract The purpose of the paper is to produce new empirical evidence regarding the determinants of R&D investment by Tunisian firms, through introducing the relationship between R&D expenditures and innovation effort of firms. We suppose that factors explaining in-house R&D are not the same according to whether the firm is innovating or not. Our empirical analysis utilizes econometric models of selectivity correction (Heckman, 1976-1979; Lee, 1976-1978) and considers a sample of 320 firms during the period 2002-2005. On the one hand, econometrics results show a positive impact of R&D activities, human capital quality, past experience in innovation and publics subsidies on probability to innovate of firms whereas ownership structure (state and foreign owners) have a negative impact. While on the other hand, when estimating the determinants of R&D expenditures for the two groups of firms (innovating and non-innovating) we find interesting results; there are spillover effects only for innovating firms and which have an absorptive capacity. Also channels for acquisition of external technologies play an important role in explaining R&D expenditures. Finally, ownership structure has a significant impact on R&D investment especially for foreign controlled firms. The effect is positive for innovating firms and negative for non-innovating firms.