Abstract:

This study investigates the firm-level determinants of product innovation in the Turkish manufacturing industry. Innovation affects firm performance and long-run macroeconomic growth directly. Product innovation increases the quality and variety of goods and services, opens new markets, and creates new jobs. Understanding firm-level determinants of innovation opens up an opportunity to develop policies for more innovative industries. Using a sample of 1,085 firms from the World Bank’s 2015 Enterprise Survey dataset, the results show that the relation between firms’ probability of being product innovator with market structure has an inverse-U shape which means combining effects of the Schumpeterian effect, which shows the negative effect, and escape-competition effect, which shows the positive effect, in the Turkish manufacturing industry. Also, it is found that there is a negative relation between the productivity gap and product innovation. The research results show that the firms carrying out R&D activities are more likely to make product innovation, and the patent holder companies are more likely to make product innovation. It is observed that firms that have received public support are 10.6% more likely to innovate, and as the export intensity increases, the probability of innovation increases.

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