EFFECT OF R&D ON PRODUCT AND PROCESS INNOVATION IN THE TURKISH MANUFACTURING INDUSTRY

Abstract

R&D activities are an indispensable driving force to increase the likelihood of occurrence of innovation and the growth rate of technology. Studies on the impact of R&D activities on sectors in Türkiye using micro data are still insufficient. To fill this gap, this study aims to analyze the effects of R&D on product and process innovation in the Turkish manufacturing industry by making sub-breakdowns of R&D variables. The research also presents policy recommendations to support R&D plans in Türkiye. To accomplish these objectives, panel data estimation methods are used. A panel data set was generated by merging four different microdata sets provided by TURKSTAT, which is classified by NACE Rev.2 and covers the years between 2009 and 2016. Probit model is used to estimate the effects of R&D expenditure, R&D intensity (as an indicator of R&D investment), R&D personnel ratio (as an indicator of know-how), and other determinants of innovation. Moreover, total R&D expenditure is separated into four breakdowns such as internal, external, external-domestic, and external-foreign. Key findings of the research show that the effects of R&D expenditure on product and process innovations vary by its sub-breakdowns. Total and internal R&D expenditure have positive effect on both product and process innovations while external and external-domestic R&D expenditure have positive effect only on product innovation, and external-foreign R&D expenditure only on process innovation. Only external, external-domestic, and external-foreign R&D intensity have positive effect on both product and process innovation.