The moderating role of market uncertainty in the effectiveness of government policies and R&D activities promoting innovation in manufacturing firms

Peter Moffatt, Young-Ah Kim, Kyung-Ah Kim

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Abstract

Purpose: The purpose of this study is to examine the impact of government support policies and research and development (R&D) activities on product innovation under market uncertainty. Design/methodology/approach: This study applies logistic regression analysis to a sample of 4,000 South Korean manufacturing firms in order to investigate the impact of government policies and R&D activities of the firm on firm innovation performance, with particular interest in the moderating role of the firm's perceived market uncertainty (PMU). Findings: Policies supporting industry/university/institute/local collaboration are found to have greater benefit under high PMU. Surprisingly, support for a consortium among different-sized firms has a negative effect on product innovation, although this negative effect disappears under high PMU. Both support for the protection of intellectual property (IP) and support for the resolution of manpower shortages have strong positive effects on the propensity to innovate products, but in both cases the moderating effects of uncertainty are negative. Finally, all types of R&D activities have positive effects on the propensity to innovate, more so for new product innovation than for improved product innovation. Originality/value: To the best of the authors' knowledge, this is the first study to examine analytically the moderating effect of PMU in the effectiveness of government policies promoting innovation in the manufacturing sector. The study is potentially useful both for policymakers in deciding which policies to implement under prevailing market conditions; and for entrepreneurs choosing between different forms of government support, particularly given the abnormal levels of market uncertainty prevailing in the Covid-19 era.

Original languageEnglish
Pages (from-to)1204-1226
Number of pages23
JournalInternational Journal of Entrepreneurial Behaviour & Research
Volume29
Issue number5
Early online date5 May 2023
DOIs
Publication statusPublished - 16 May 2023

Keywords

  • R&D
  • product innovation
  • market uncertainty
  • government policies
  • Government policies
  • Improved product innovation
  • R&D activities
  • New product innovation
  • Perceived market uncertainty

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