Innovation over the industry life-cycle: Evidence from EU manufacturing

Empirical research has revealed some regularities regarding the innovation that takes place over the industry life-cycle. First, innovation is high when an industry is young and low when the industry matures, and second, product innovation decreases with industry maturity, while process innovation increases. The implications of these regularities are profound, but evidence is to date largely case based and it is hard to generalize and draw policy conclusions. We use a flexible measure of maturity and a novel modeling approach to investigate innovation patterns for 21 European manufacturing industries. Our results strongly support both assertions and lend support to life-cycle based R&D-policy.

► We introduce a flexible measure of industry maturity.
► We use a novel approach to model innovation patterns for European manufacturing industries.
► Product (process) innovations decrease (increase) with industry maturity.
► Optimal R&D policy depends on the life-cycle stage and market share of industries.