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Analysing changes over time in firm-level R and D efforts, we find that demand growth in a firm's sector of principal activity has a positive influence on changes in a firm's R and D effort, confirming Schmookler's (1969) 'demand-pull' hypothesis. This finding points to an aspect of effective demand which has never been directly noticed by Keynes or the Keynesians. Such findings are important because of evidence in the literature that a firm's innovation activities are positively related to employment growth, export intensity and profits.
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Erik Brouwer (1999) studied this question.
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