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The role of R&D in new firm growth

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  • Erik Stam

    (Tjalling Koopmans Institute, Utrecht School of Economics, Utrecht University, Utrecht, The Netherlands; Centre for Technology Management, University of Cambridge, Cambridge, United Kingdom; Scientific Council for Government Policy (WRR), The Hague, The Netherlands; Max Planck Institute of Economics - Entrepreneurship, Growth and Public Policy group, Jena, Germany)

  • Karl Wennberg

    (Centre for Entrepreneurship and Business Creation, Stockholm School of Economics, Stockholm, Sweden.)

Abstract

Innovative start-ups are an important driver of economic growth. This article presents empirical evidence on the effects of R&D on new product development, inter-firm alliances and employment growth during the early life course of firms. We use a dataset that contains a sample of new firms that is representative for the whole population of start-ups. This dataset covers the first six years of the life course of firms. R&D reveals to play several roles during the early life course of high tech as well as high growth firms. The effect of initial R&D on high tech firm growth runs via increasing levels of inter-firm alliances in the first post-entry years. R&D efforts enable the exploitation of external knowledge. Initial R&D also stimulates new product development later on in the life course of high tech firms, but this does not seem to affect firm growth. R&D does not affect the growth rate of new low tech firms, which seems to be driven mainly by the growth ambitions of the founding entrepreneur. The results show that R&D matters for a limited but important set of new high tech and high growth firms, which are key in innovation and entrepreneurship policies.

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Bibliographic Info

Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2009-004.

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Date of creation: 12 Jan 2009
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Handle: RePEc:jrp:jrpwrp:2009-004

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Keywords: New Firms; Innovation; R&D; firm growth; alliances; product development;

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