Modelling the virtuous circle of innovation. A test on Italian firms

The ‘virtuous circle’ between innovative inputs, outputs and economic performance is investigated in this article with a three-equation model highlighting feedback loops and simultaneous relations. An empirical test is carried out considering innovative expenditure, innovative turnover and economic results in a sample of Italian manufacturing firms, comparing occasional and serial innovators. We use data for the period 1998-2007 from a rich panel of Italian firms over 20 employees drawn from ISTAT, the National Institute of Statistics, including data from three waves of Community Innovation Surveys. The model we use extends the one developed at the industry level by Bogliacino and Pianta (2013a, 2013b), confirming previous findings. For the core of Italian persistent innovators, results show the complex links at play in different phases of the innovation process, and the feedbacks between economic success and the ability to sustain innovation expenditure.

working_paper_2016_3_coverModelling the virtuous circle of innovation. A test on Italian firms

Francesco Bogliacino
Universidad Nacional de Colombia

Matteo Lucchese
Istat and Università di Urbino

Leopoldo Nascia

Mario Pianta
Università di Urbino


Working Paper
3/2016 January