Innovation and the Determinants of Firm Survival
AbstractWhile many firms compete through the development of new technologies and products, it is well known that new-to-the-world innovation is inherently risky and therefore may increase the probability of firm death. However, many existing studies consistently find a negative association between innovative activity and firm death. We argue that this may occur because authors fail to distinguish between innovation investments and innovation capital. Using an unbalanced panel of over 290,000 Australian companies, we estimate a piecewise-constant exponential hazard rate model to examine the relationship between innovation and survival and find that current innovation investments increase the probability of death while innovation capital lowers it.
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Bibliographic InfoPaper provided by Melbourne Institute of Applied Economic and Social Research, The University of Melbourne in its series Melbourne Institute Working Paper Series with number wp2006n15.
Length: 31 pages
Date of creation: Jul 2006
Date of revision:
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Postal: Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Victoria 3010 Australia
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Other versions of this item:
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- O32 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Management of Technological Innovation and R&D
- C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-07-22 (All new papers)
- NEP-BEC-2006-07-25 (Business Economics)
- NEP-COM-2006-07-24 (Industrial Competition)
- NEP-ENT-2006-07-25 (Entrepreneurship)
- NEP-INO-2006-07-26 (Innovation)
- NEP-MIC-2006-07-24 (Microeconomics)
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