Technology Absorption and Its Determinants
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representing a response rate of approximately 37 percent (Blankley and Moses 2009, 6).10 Unfortunately, the surveys ask only a few questions of firms that introduced neither a new product nor a new process. All that is known about these “noninnovator” firms is their turnover, exports, and number of employees (in levels and growth rates); the main industry they belong to; and their potential affiliation to a group. The 979 firms surveyed can be classified into four categories: (a) companies that introduced a new product—515 firms; (b) companies that introduced a new process—486 firms; (c) companies that introduced both a new product and a new process—396 firms; and (d) companies that introduced either a new product or a new process—605 firms (“innovators”). The NIS data set contains a number of variables describing outcomes closely related to technology absorption, each of which is obtained from detailed interviews of managers of firms. In these surveys, firm managers are asked specifically whether their firm recently introduced a new product (either new to the firm or new to the market), acquired a new production process, or other. Each of these potentially represents a dimension of the technology absorption process. The NIS also allows the comparison between new-to-the-market and new-to-the-firm innovations. The analysis characterizes the relationship between a firm’s probabilities of introducing any of the dimensions of technology absorption and the underlying determinants of absorption outcomes by estimating a production function for technology absorption: Technology absorption = f (K, L, OPEN, IP, R&D, HC, IC, PS), where K is access to finance, L represents firm employment, OPEN represents the openness of the firm to international trade and knowledge from abroad, IP is the ownership of intellectual property (patents and know-how), R&D indicates whether the firm conducts R&D, HC refers to human capital, IC is a catchall variable for the investment climate, and PS is public support for technology absorption. In this formulation, the determinants can be seen as inputs into this production function. All regressions control for the firm’s sector and size, as measured by total employment. To identify the determinants of technology absorption, correlations are estimated (using multivariate regressions) between the measures of technology absorption and a variety of explanatory variables, which include firm employment, R&D, firm export status, foreign ownership or FDI status, tertiary education, subsidiary status, financial constraints,