Quality of Government and Types of Innovation—Empirical Evidence for Italian Manufacturing Firms

Using firm-level information on Italian manufacturing companies provided by Capitalia and the Institutional Quality Index (IQI) dataset over the 2004–2006 (10th edition) period, we employ a multi-probit model to assess the effects of government quality upon four dimensions of innovation, namely, marketing, organisational, product and process innovation. Findings presented in the paper suggest that higher government quality stimulates firms’ innovative activities, though the impact of governance varies across the various dimensions of innovation examined. Our evidence, which is robust to firms’ size, PAVITT classification and firms’ geographical location, provides room for policy interventions.