Isogawa, Daiya, Kohei Nishikawa and Hiroshi Ohashi

This study evaluates the economic impact of product innovation by using firm-level data obtained from the Community Innovation Survey conducted in Japan. It accounts for possible technological spillovers from innovation activities, and examines the extent to which new-to-market product innovation contributes to firm performance. Casual observations on the data reveal that new-to-market product innovation is likely to (1) contribute higher sales for the firm with less cannibalization with existing products; (2) generate higher degree of technological spillovers to other innovations; and (3) be brought by those firms that corroborate with universities and other academic institutions. An econometric analysis on simultaneous equations confirms these observations. Policy implications are also discussed.