Summary
This paper discusses a model for analysing the sales of new products. This model accounts for the fact that, even among those companies with permanent R&D activities, a fraction of the firms did not have sales of innovative products over a two-year observation period. We propose a model in which the fixed costs of introduction are a major concern in the decision-making process. We apply a censored regression model, extended by a firm-specific threshold. We use a structural model to estimate the fixed costs of introducing new products to the market, and explain subsequent sales of innovative products. We examine an indicator of innovative output, i.e. the sales of products ‘new to the firm’. We estimate fixed cost thresholds by using data from the Dutch section of the Community Innovation Survey (CIS) of 1998. R&D intensity, competition, and market structure all have a positive impact on the sales of new products. The most important factors that reduce the fixed cost threshold of introduction are product-related R&D investments, R&D subsidies, and knowledge spillovers.
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We would like to thank Geert Ridder, Alfred Kleinknecht and two anonymous reviewers for their valuable comments and discussion.
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Open Access This is an open access article distributed under the terms of the Creative Commons Attribution Noncommercial License (https://creativecommons.org/licenses/by-nc/2.0), which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited.
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Brouwer, E., Poot, T. & Van Montfort, K. The Innovation Threshold. De Economist 156, 45–71 (2008). https://doi.org/10.1007/s10645-007-9081-y
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DOI: https://doi.org/10.1007/s10645-007-9081-y