Abstract

Based on a survey which includes over 5.000 European firms, this article investigates the innovation investment strategies of firms in response to the crisis in the service and manufacturing sectors. Overall innovation investment shows a cyclical dynamic. Countries with high intensity in knowledge-intensive services are relatively less hit by the recession. At the firm level, firms devoted to service innovation are more inclined to invest in innovation as a response of the crisis. Specifically, strategies combining both product and service innovation play a positive role in the manufacturing sector. In the service industry, instead, increase in innovation is explained by innovation in services along with new marketing practices and organizational change.