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Innovation and Training in New Firms

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  • Baldwin, John R.

Abstract

Recent studies have demonstrated the quantitative importance of entry, exit, growth and decline in the industrial population. It is this turnover that rewards innovative activity and contributes to productivity growth. While the size of the entry population is impressive - especially when cumulated over time - the importance of entry is ultimately due to its impact on innovation in the economy. Experimentation is important in a dynamic, market-based economy. A key part of the experimentation comes from entrants. New entrepreneurs constantly offer consumers new products both in terms of the basic good and the level of service that accompanies it. This experimentation is associated with significant costs since many entrants fail. Young firms are most at risk of failure; data drawn from a longitudinal file of Canadian entrants in both the goods and service sectors show that over half the new firms that fail do so in the first two years of life. Life is short for the majority of entrants. Only 1 in 5 new firms survive to their tenth birthday. Since so many entrants fall by the wayside, it is of inherent interest to understand the conditions that are associated with success, the conditions that allow the potential in new entrepreneurs to come to fruition. The success of an entrant is due to its choosing the correct combination of strategies and activities. To understand how these capabilities contribute to growth, it is necessary to study how the performance of entrants relates to differences in strategies and pursued activities. This paper describes the environment and the characteristics of entrants that manage to survive and grow. In doing so, it focuses on two issues. The first is the innovativeness of entrants and the extent to which their growth depends on their innovativeness. The second is to outline how the stress on worker skills, which is partially related to training, complements innovation and contributes to growth.

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Bibliographic Info

Paper provided by Statistics Canada, Analytical Studies Branch in its series Analytical Studies Branch Research Paper Series with number 2000123e.

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Date of creation: 08 Dec 2000
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Handle: RePEc:stc:stcp3e:2000123e

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Related research

Keywords: Adult education and training; Business performance and ownership; Education; training and learning; Innovation; Job training and educational attainment; Labour; Science and technology; Small and medium-sized businesses;

References

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  1. Samuel Hollander, 1965. "The Sources of Increased Efficiency: A Study of DuPont Rayon Plants," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 026258235x, December.
  2. Baldwin, John R., 1996. "Productivity Growth, Plant Turnover and Restructuring in the Canadian Manufacturing Sector," Analytical Studies Branch Research Paper Series, Statistics Canada, Analytical Studies Branch 1995087e, Statistics Canada, Analytical Studies Branch.
  3. Baldwin, John R. & Bian, Lin & Dupuy, Richard & Gellatly, Guy, 2000. "Failure Rates for New Canadian Firms: New Perspectives on Entry and Exit," Failure Rates for New Canadian Firms: New Perspectives on Entry and Exit, Statistics Canada, Economic Analysis, Statistics Canada, Economic Analysis, number stcb5e, December.
  4. John C. Haltiwanger, 1997. "Measuring and analyzing aggregate fluctuations: the importance of building from microeconomic evidence," Review, Federal Reserve Bank of St. Louis, Federal Reserve Bank of St. Louis, issue May, pages 55-78.
  5. Gort, Michael & Klepper, Steven, 1982. "Time Paths in the Diffusion of Product Innovations," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 92(367), pages 630-53, September.
  6. Dunne, T. & Roberts, M.J. & Samuelson, L., 1988. "Pattenrs Of Firm Entry And Exit In U.S. Manufacturing Industries," Papers, Pennsylvania State - Department of Economics 1-88-2, Pennsylvania State - Department of Economics.
  7. Baldwin,John R. & Gorecki,Paul With contributions by-Name:Caves,Richard E., 1995. "The Dynamics of Industrial Competition," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521465618.
  8. Baldwin, John R. & Johnson, Joanne, 1996. "Business strategies in more- and less-innovative firms in Canada," Research Policy, Elsevier, Elsevier, vol. 25(5), pages 785-804, August.
  9. Picot, Garnett & Dupuy, Richard & Baldwin, John R., 1994. "Have Small Firms Created a Disproportionate Share of New Jobs in Canada? A Reassessment of the Facts," Analytical Studies Branch Research Paper Series, Statistics Canada, Analytical Studies Branch 1994071e, Statistics Canada, Analytical Studies Branch.
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Citations

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Cited by:
  1. Baldwin, John R. & Yates, Janice, 1999. "Innovation, Training and Success," Analytical Studies Branch Research Paper Series, Statistics Canada, Analytical Studies Branch 1999137e, Statistics Canada, Analytical Studies Branch.
  2. Sabourin, David & Baldwin, John R., 2001. "Impact of the Adoption of Advanced Information and Communication Technologies on Firm Performance in the Canadian Manufacturing Sector," Analytical Studies Branch Research Paper Series, Statistics Canada, Analytical Studies Branch 2001174e, Statistics Canada, Analytical Studies Branch.
  3. Sabourin, David & Baldwin, John R. & Smith, David, 2003. "Impact of Advanced Technology Use on Firm Performance in the Canadian Food Processing Sector," Economic Analysis (EA) Research Paper Series, Statistics Canada, Analytical Studies Branch 2003012e, Statistics Canada, Analytical Studies Branch.
  4. Yanick Labrie & Claude Montmarquette, 2005. "La formation qualifiante et transférable en milieu de travail," CIRANO Project Reports, CIRANO 2005rp-04, CIRANO.
  5. Beckstead, Desmond & Gellatly, Guy, 2004. "Are Knowledge Workers Found Only in High-technology Industries?," The Canadian Economy in Transition 2004005e, Statistics Canada, Economic Analysis.
  6. Spyros Arvanitis & Tobias Stucki, 2008. "Training Propensity of Start-ups in Switzerland - A Study Based on Data for the Start-up Cohort 1996-97," KOF Working papers, KOF Swiss Economic Institute, ETH Zurich 08-199, KOF Swiss Economic Institute, ETH Zurich.
  7. Sabourin, David & Baldwin, John R. & Hanel, Peter, 2000. "Determinants of Innovative Activity in Canadian Manufacturing Firms: The Role of Intellectual Property Rights," Analytical Studies Branch Research Paper Series, Statistics Canada, Analytical Studies Branch 2000122e, Statistics Canada, Analytical Studies Branch.

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