Abstract

The aim of this study is to analyse the effects of barriers to innovation on firms’ propensity
to engage in radical and incremental innovations. We look at innovative and potentially innovative
firms and estimate the effect of three types of barriers—financial, knowledge and competition—on
the propensity to radical innovation new to the world, radical innovation new to the market and
incremental innovation. An empirical study has been performed, drawing on data collected from the
German Mannheim Innovation Panel covering the period from 2014 to 2016. Empirical results reveal
heterogeneous effects of barriers depending on the degree of radicalness. In particular, knowledge
and competition barriers are an impediment to radical innovation, whereas financial and knowledge
barriers reduce a probability of incremental innovation. Based on the findings, we discuss policy
recommendations for mitigating barriers to innovation conditional on the degree of radicalness.