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

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.