The Relationship Between Innovation and New Firm Growth
AbstractThis paper seeks to untangle the relationship between new firm’s innovative activities and subsequent growth. We theorize about the inter-related roles of managerial growth willingness, inputs and outputs of innovative activities, and their subsequent link to sales growth. Investigating a longitudinal sample of 282 new Swedish firms reveals a complex set of mediating relationships that, when combined, help explain how innovation affects growth. First, we find growth willingness has an important relationship with innovative inputs such as R&D and market knowledge competence. Second, these inputs affect important innovative outputs such as new product development and the percentage of sales from new products. Third, these outputs directly affect growth – whereas the innovative inputs such as R&D do not have a direct impact. Taken together, our paper highlights the joint importance of managerial attitudes and strategic choices that help to shed new light on the effect of innovation on new firm growth. Implications for research and public policy are discussed.
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Bibliographic InfoPaper provided by The Ratio Institute in its series Ratio Working Papers with number 206.
Length: 37 pages
Date of creation: 05 Mar 2013
Date of revision:
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New Firm Growth; Innovation; RD; Growth Willingness;
Find related papers by JEL classification:
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
- L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
- M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-06-16 (All new papers)
- NEP-CSE-2013-06-16 (Economics of Strategic Management)
- NEP-ENT-2013-06-16 (Entrepreneurship)
- NEP-FDG-2013-06-16 (Financial Development & Growth)
- NEP-INO-2013-06-16 (Innovation)
- NEP-KNM-2013-06-16 (Knowledge Management & Knowledge Economy)
- NEP-SBM-2013-06-16 (Small Business Management)
- NEP-TID-2013-06-16 (Technology & Industrial Dynamics)
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