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Going, going, gone. Exit forms and the innovative capabilities of firms

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  • Cefis, Elena
  • Marsili, Orietta
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    Abstract

    Although innovation is essential to build a competitive advantage and survive in the long run, some firms choose to exit, through mergers and acquisitions (M&As), or radically change their business portfolio and identity. This paper examines how innovative capabilities influence the decision of a firm to exit, among business closure, M&A, and radical restructuring. Using an analysis of a large and rich panel of Dutch manufacturing firms, we find that product and process innovation are equally important to lower the probability to close down activities, and this effect is stronger when product and process innovations are pursed in combination. We also find that process innovation reduces the probability of exit by radical restructuring, while product innovation, when not supported by process innovation, especially increases the probability of exit by M&As. Our findings suggest that exit strategies are intimately bound to the nature and synergies of innovative efforts.

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    Bibliographic Info

    Article provided by Elsevier in its journal Research Policy.

    Volume (Year): 41 (2012)
    Issue (Month): 5 ()
    Pages: 795-807

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    Handle: RePEc:eee:respol:v:41:y:2012:i:5:p:795-807

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    Web page: http://www.elsevier.com/locate/respol

    Related research

    Keywords: Firm exit; Merger and acquisition (M&A); Restructuring; Product and process innovation; Competing risks model;

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    Cited by:
    1. Stephen Roper & Helen Xia, 2014. "Innovation, innovation strategy and survival," Research Papers, University of Warwick, Warwick Business School, Enterprise Research Centre 0017, University of Warwick, Warwick Business School, Enterprise Research Centre.
    2. Huong Vu & Steven Lim, 2013. "Exports and Firm survival: The first evidence from Vietnam private manufacturing SMEs," Economics Bulletin, AccessEcon, vol. 33(2), pages 1259-1268.
    3. Vu, Van Huong, 2012. "Private manufacturing SMEs survival and growth in Vietnam: The role of export participation," MPRA Paper 42489, University Library of Munich, Germany.

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