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Economic Development and Entrepreneurship in Transition Economies pp 147–168Cite as

Innovation and Firm-Performance Correlations: The Case of Central and South Eastern Europe Countries

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Abstract

The aim of this paper is to investigate the determinants of innovation activities and their impact on firm performance. For the empirical analysis of the study we employ Business Environment Enterprise Performance Surveys (BEEPS) firm-level data. To examine the relationship between innovation activities and firm performance we apply instrumental variable (IV) technique, which enables us to control for the endogeneity between innovation activities undertaken by entrepreneurial businesses and their performance. Our findings suggest that enterprises’ size, R&D intensity, competition, skilled workers and export activity have positive and significant impact on their incentive to undertake innovation activities. Considering the determinants of productivity, we find evidence that enterprises that have undertaken innovation activities (instrumented variable) and having higher degree of skilled workers and that are European Union member country enterprises perform better.

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Notes

  1. 1.

    Based on Dana and Ramadani (2015).

  2. 2.

    The violation of the zero-conditional-mean-assumption (E[u|x] = 0) can also arise for two other causes than endogeneity: omission of relevant variables and measurement error in regressors.

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Authors and Affiliations

  1. Faculty of Business and Economics, South East European University, Tetovo, Macedonia

    Hyrije Abazi-Alili & Veland Ramadani

  2. CERGE-EI, Prague, Czech Republic

    Hyrije Abazi-Alili

  3. College of Business Administration, American University of Middle-East, Eqaila, Kuwait

    Shqipe Gërguri-Rashiti

Authors
  1. Hyrije Abazi-Alili
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  2. Veland Ramadani
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  3. Shqipe Gërguri-Rashiti
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Correspondence to Hyrije Abazi-Alili .

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Editors and Affiliations

  1. Faculty of Economics, University of Banja Luka, Banja Luka, Bosnia and Herzegovina

    Jovo Ateljević

  2. Faculty of Economics, University of Banja Luka, Banja Luka, Bosnia and Herzegovina

    Jelena Trivić

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Abazi-Alili, H., Ramadani, V., Gërguri-Rashiti, S. (2016). Innovation and Firm-Performance Correlations: The Case of Central and South Eastern Europe Countries. In: Ateljević, J., Trivić, J. (eds) Economic Development and Entrepreneurship in Transition Economies . Springer, Cham. https://doi.org/10.1007/978-3-319-28856-7_9

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