Tuesday, 19 July 2016

Innovation in the Eurozone, money -- and data

"The Effect of Innovative Activity in Firm Performance and Development: Analysing Data from Eurozone" is the grand title of a recently published paper by Ilias A. Makris (Technological Educational Institute of Peloponnese, Greece) for the International Journal of Business and Economic Sciences Applied Research, Vol. 9, No. 2, 2016. It's available for download from the excellent SSRN service hereYou can get an idea of what this short paper (just six dense sides, inclusive of figures and bibliography) is all about from its abstract:
Purpose – The purpose of this paper is to examine the effect of Innovative Activity on firm performance and growth. Active Research and Development is considered to be directly related with development, prosperity and growth, in micro and macro level and a key factor in hindering economic recession.

Design/methodology/approach – We analyse economic data from listed firms of selected Eurozone country-members in order to associate Research and Development with performance indicators in firm and country level. For that purpose, several firm data were collected from WorldScope data base and macroeconomic data from Worldbank database. The period examined is between 2002 and 2012, with a special focus on current financial crisis (after 2007). The empirical process includes descriptive statistics and logistic regression analysis.

Findings – Findings indicate the crucial effect of innovative process in economic performance and development in firm and country level. The latter highlights the urgent need for public support in order to spur innovative activity and high-tech exports, especially in countries that were heavily affected by recession.

Research limitations/implications – Some research limitations are the large number of missing cases in WordScope database, as many firms after the beginning of current crisis exit stock market. Furthermore, the other part of the economy, the Small and Medium Enterprises does not exist in the analysis, as listed firms are mainly large and mature companies.

Originality/value – The results tend to highlight the need for common policy measures in the Eurozone, in regard to such issues, instead of imposing horizontal budgetary constraints in specific countries (like Southern Europe), hindering the vicious recessionary circle.
It is a shame that the period under study is the decade leading to 2012, since arguably so much has changed in the intervening time that we should be cautious to assume that its findings are applicable now. Be that as it may, the study should not pass without comment.

At least in
the Eurozone ...
First, the study reminds us of the important function of money as a lubricator for the innovation process.  It needs to be present from the earliest stages of the innovative process, to subsidise or incentivise innovative activity that lies beyond the personal resources of the innovator and which, on account of the risk factor, may not attract private funding. Money is also needed at the other end, once an innovative idea has been rendered into practice, so that prospective customers and consumers can afford to buy the resulting product or service.  An economy that is starved of money, or at least kept short of it, is an economy that will struggle to support and sustain innovation.

Secondly, the author refers to the dearth of relevant data, in particular on SMEs, which inevitably reduces the value of the research undertaken here.  Not just academic researchers in economics but those of us who are engaged in any sort of data analysis are forever limited in what we can achieve by the quality and the availability of the data that is analysed.  We seem to have reached a point at which computer science and software have raced ahead of the game, while techniques for gathering the most up-to-date, relevant and reliable data have lagged behind.  

Are we in danger of knowing more and more about less and less? Very possibly so. But let us hope that those businesses and bodies on whose data we all rely will be able to achieve a satisfactory measure of catch-up. If not, we will all be performing wonderful tricks ad infinitum on tired and scanty data.


  1. Isn't WorldScope part of the Thomson Reuters data package? Has it been sold with the IP and Science stuff?

  2. Thanks for your question. No, WorldScope is not part of the IP & Science package.