Innovation and Connectivity: The Nature of Market Linkages and Innovation Networks in Canadian Manufacturing Industries

This paper investigates the extent to which customers/suppliers innovation networks are related to the size and pattern of inter-industry goods flows. It does so by devising a diversification index to measure the nature of inter-industry links that arise from the flow of goods and services from suppliers to customers. It then relates these diversification patterns to the importance of customer and supplier innovation networks.

Input/output matrices are used to measure the extent of inter-industry links and the pattern of inter-industry goods flows. The importance of customer/supplier networks is derived from data coming from the 1993 Survey of Innovation and Advanced Technology.

The study finds that the importance of supplier and of customer innovation networks is related to the structure of inter-industry trade flows. Where there are a small number of important backward inter-industry links, firms are more likely to make greater use of supplier partnerships. On the other hand, the importance of customer links increases when there is a large number of industry linkages downstream.