Economic growth is driven to a large extent by technological progress and innovation. It is therefore essential for effective public policy to identify the group of innovative industries so that policy makers will be able to target government incentive programs toward this specific group of industries. In the present study we assumed that innovation is more prevalent among the group of fastest-growing industries. Thus, the major objective of the current study was to develop a methodology with which it will possible to identify this specific group of industries. Furthermore, we hypothesized that within the fastest-growing industries the hi-technology (electronic) firms are by far more innovative than the ‘traditional’ (plastic and metal) firms.The findings corroborate our hypothesis that fastest-growing industries are highly innovative. Moreover, hi-technology firms have a significantly greater probability of engaging in innovation than the more ‘traditional’ firms.
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