Market versus corporate structure in plant-level innovation performance

This paper examines the effect which market and corporate structure have on the extent of innovation for a sample of circa 300 manufacturing plants lo cated in Scotland. Innovation is defined as the introduction of a commercia lly significant new product at the establishment level. The theoretical mod el of Geroski (1990) is extended to incorporate plant- level variables such as size, multiplant operation, the presence of R&D facilities and external /indigenous ownership. A distinction is made between the direct and indirec t effects of these variables. Negative binomial estimations indicate that c orporate structure influences are more important in determining the number of innovations than market structure and barrier to entry variables. Plant size, foreign ownership and the presence of R&D are all positively associat ed with innovation. Direct effects greatly outweigh indirect effects. Tobit estimations on the number of innovations per employee support the findings of Acs and Audretsch (1988) that smaller enterprises are more innovation i ntensive than larger enterprises, at least up to a limit of around 1200 emp loyees. The positive effect of R&D arises principally from increasing the p robability of a plant becoming an innovator, rather than from making a plan t more innovation intensive. By contrast, the importance of size lies princ ipally in encouraging further innovations among plants which are already in novators, but less than proportionately with the increase in employment siz e.