Predicting the innovation activity of chemical firms using an ensemble of decision trees

A number of studies are concerned with the analysis of predicting innovation activity, because companies´ innovation activity is one of the fundamental determinants for their competitiveness. However, most studies use a linear (logistic) regression model for their analysis. This, however, is not able to take into account all the recursive terms concerning a company´s innovation activity. Therefore, in the report we demonstrate the use of ensembles of decision trees to model the intrinsic nonlinear characteristics of the innovation process. We apply this method for predicting innovation activity to chemical companies. We show that internal knowledge spillovers were the most important determinant for the chemical Arms´ innovation activity during the monitored period. Furthermore, R&D intensity, collaboration on innovation and firm size were also important determinants.