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Innovation and the determinants of company survival

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  • Hielke Buddelmeyer
  • Paul H. Jensen
  • Elizabeth Webster

Abstract

Although many companies compete through the development of new technologies and products, it is well known that innovation is inherently risky and therefore may increase the ex ante likelihood of both exceptional company performance and bankruptcy. However, existing empirical studies consistently find a positive relationship between innovative activity and company survival. We argue that this conclusion may be a result of a simple selection effect caused by the degree of uncertainty embodied in the innovation proxies used. Using a panel of almost 300,000 Australian companies, we estimate a piecewise-constant exponential hazard rate model to examine the relationship between innovation and company survival. As expected, we find that the degree of uncertainty embodied in different innovation proxies does shape the pattern of company survival. Copyright 2010 , Oxford University Press.

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File URL: http://hdl.handle.net/10.1093/oep/gpp012
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Bibliographic Info

Article provided by Oxford University Press in its journal Oxford Economic Papers.

Volume (Year): 62 (2010)
Issue (Month): 2 (April)
Pages: 261-285

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Handle: RePEc:oup:oxecpp:v:62:y:2010:i:2:p:261-285

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Cited by:
  1. Cefis, Elena & Marsili, Orietta, 2012. "Going, going, gone. Exit forms and the innovative capabilities of firms," Research Policy, Elsevier, vol. 41(5), pages 795-807.
  2. Bernd Ebersberger, 2011. "Public funding for innovation and the exit of firms," Journal of Evolutionary Economics, Springer, vol. 21(3), pages 519-543, August.
  3. Zhang, Mingqian & Mohnen, Pierre, 2013. "Innovation and survival of new firms in Chinese manufacturing, 2000-2006," MERIT Working Papers 057, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  4. Chiara Pederzoli & Grid Thoma & Costanza Torricelli, 2013. "Modelling Credit Risk for Innovative SMEs: the Role of Innovation Measures," Journal of Financial Services Research, Springer, vol. 44(1), pages 111-129, August.
  5. Tristan Boyer & RĂ©gis Blazy, 2014. "Born to be alive? The survival of innovative and non-innovative French micro-start-ups," Small Business Economics, Springer, vol. 42(4), pages 669-683, April.
  6. Masatoshi Kato & Yuji Honjo, 2010. "Heterogeneous Exits: Evidence from New Firms," Discussion Paper Series 64, School of Economics, Kwansei Gakuin University, revised Nov 2010.
  7. Tobias Stucki, 2009. "How Long Do External Capital Constraints Matter?," KOF Working papers 09-241, KOF Swiss Economic Institute, ETH Zurich.

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