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Innovation and the Determinants of Firm Survival

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Author Info
Hielke Buddelmeyer () (University of Melbourne and IZA Bonn)
Paul H. Jensen () (University of Melbourne)
Elizabeth Webster () (University of Melbourne)

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Abstract

While 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 piecewiseconstant 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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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2386.

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Length: 27 pages
Date of creation: Oct 2006
Date of revision:
Handle: RePEc:iza:izadps:dp2386

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Related research
Keywords: firm survival innovation

Other versions of this item:

Find related papers by JEL classification:
O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives
O32 - Economic Development, Technological Change, and Growth - - Technological Change - - - Management of Technological Innovation and R&D
C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis

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References listed on IDEAS
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    Other versions:
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  16. Silviano Pérez & Amparo Llopis & Juan Llopis, 2004. "The Determinants of Survival of Spanish Manufacturing Firms," Review of Industrial Organization, Springer, vol. 25(3), pages 251-273, 08. [Downloadable!] (restricted)
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