Is demand-pulled innovation equally important in different groups of firms?

Previous empirical literature has tested the demand-pull hypothesis and found that innovation may be driven by output. Using a balanced panel of 216 Italian manufacturing firms (1995-2000) and checking for the path-dependent nature of R&D we find a role of sales in inducing R&D. However, the demand-pull effect plays a varying role for different sub-samples of firms. Exporting firms, liquidity-constrained firms, unsubsidised firms and those not heading a group seem to be sensitive to sales in deciding R&D. These results have been obtained using a Least Squares Dummy Variable Corrected Estimator, a recent panel-data technique suitable for small samples.