Innovation behaviour of firms in a small open economy: the case of the Czech manufacturing industry

This paper describes the role of R&D and analyse its impact on productivity in the Czech economy in a CDM model. Four CIS waves (2001, 2003, 2006, and 2008) were used in the CDM model. The estimated low innovation input elasticity around 9 % describes the Czechs as poor innovators in the EU. This economy was a developing country until 2006 and we have observed a substantive FDI inflow since 1998. Multinationals have a higher sales share now and are an essential part of the economy. Multinationals engage less in innovation, but innovating MNEs spend more on R&D per employee and appropriate more from their innovated goods. The FDI inflow was a form of innovation wave. Innovation output is an important determinant for boosting productivity among SME’s. Public support had positive effect on innovation intensity; however, no additional effect on innovation output.