Antecedents and Consequences of Innovation via R&D in Europe

There is plenty of literature exploring those factors affecting entrepreneurial innovation and its effects on firms’ growth. Recognizing that these streams still remain disparate, this chapter studies the simultaneous effects that a set of factors (at both company and environmental levels of analysis) have on R&D activity, which explains firm growth. An empirical strategy based on two-stage probit least squares (2SPLS) estimation is applied to data from the EU-EFIGE/Bruegel-UniCredit for seven European countries for the years 2007–2009. The obtained results suggest that the existence of foreign executives, employees with fixed-term contracts, appropriate labor regulations and access to employees who have received external training, increases the probability of having innovation via R&D, which is positively related to firms’ outputs such as employment growth. Based on these results, policy and practical implications to enhance entrepreneurial innovation and improve firms’ performances are discussed.