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Out of Equilibrium Profit and Innovation

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Abstract
Innovation is the result of intentional decision-making that takes place in out-of-equilibrium conditions. The farther is profitability from the average and the deeper the out-of-equilibrium conditions. The farther away is the firm from equilibrium and the stronger the likelihood for innovation to take place. The hypothesis of a U-relationship between levels of profitability and innovative activity, as measured by the rates of increase of total factor productivity, is articulated and tested. The evidence of a large sample of 7000 Italian firms in the years 1996-2005 confirms that a strong causal relation holds between the quadratic specification of profitability and the growth rates of total factor productivity. The results are robust to different approaches to evaluate productivity growth rates.

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  • Antonelli, Cristiano & Scellato, Giuseppe, 2008. "Out of Equilibrium Profit and Innovation," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 200804, University of Turin.
    • Handle: RePEc:uto:labeco:200804
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    Cited by:

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    2. Agnieszka Gehringer, 2011. "Pecuniary knowledge externalities and innovation: intersectoral linkages and their effects beyond technological spillovers," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 20(5), pages 495-515.
    3. Sandro Montresor & Antonio Vezzani, 2022. "Financial constraints to investing in intangibles: Do innovative and non-innovative firms differ?," The Journal of Technology Transfer, Springer, vol. 47(1), pages 1-32, February.
    4. Novaresio, Anna & Patrucco, Pier Paolo, 2023. "Innovation and trade in the automotive industry: evidence from European countries (1990-2018)," Department of Economics and Statistics Cognetti de Martiis. Working Papers 202306, University of Turin.
    5. Alex Coad & Nanditha Mathew & Emanuele Pugliese, 2017. "What's good for the goose ain't good for the gander: cock-eyed counterfactuals and the performance effects of R&D," LEM Papers Series 2017/21, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    6. Cristiano Antonelli & Francesco Crespi & Giuseppe Scellato, 2018. "Productivity growth persistence: firm strategies, size and system properties," Chapters, in: The Evolutionary Complexity of Endogenous Innovation, chapter 8, pages 176-202, Edward Elgar Publishing.
    7. Cristiano Antonelli & Gianluigi Ferraris, 2011. "Innovation as an Emerging System Property: An Agent Based Simulation Model," Journal of Artificial Societies and Social Simulation, Journal of Artificial Societies and Social Simulation, vol. 14(2), pages 1-1.
    8. Vicente Salas-Fumás & Javier Ortiz, 2019. "Innovations’ Success and Failure in the Business Cycle," Sustainability, MDPI, vol. 11(15), pages 1-22, August.
    9. Taalbi, Josef, 2017. "What drives innovation? Evidence from economic history," Research Policy, Elsevier, vol. 46(8), pages 1437-1453.
    10. Andrea Filippetti & Petros Gkotsis & Antonio Vezzani & Antonio Zinilli, 2020. "Are innovative regions more resilient? Evidence from Europe in 2008–2016," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 37(3), pages 807-832, October.
    11. Bottai, carlo & Iori, Martina, 2015. "Knowledge Clusters and Multidimensional Proximity: An Agent-Based Simulation," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201528, University of Turin.
    12. repec:got:cegedp:100 is not listed on IDEAS
    13. Cristiano Antonelli, 2011. "The Economic Complexity of Technological Change: Knowledge Interaction and Path Dependence," Chapters, in: Cristiano Antonelli (ed.), Handbook on the Economic Complexity of Technological Change, chapter 1, Edward Elgar Publishing.
    14. Antonelli Cristiano & Ferraris Gianluigi, 2012. "Endogenous knowledge externalities: an agent based simulation model where schumpeter meets Marshall," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 201202, University of Turin.
    15. Antonelli Cristiano & Crespi, Francesco & Scellato, Giuseppe, 2013. "Path Dependent Patterns of Persistence in Productivity Growth," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 201310, University of Turin.

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