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Innovation and survival of new firms in Chinese manufacturing, 2000-2006

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  • Zhang, Mingqian

    (Shanghai International Studies University)

  • Mohnen, Pierre

    ()
    (UNU-MERIT / MGSoG)

Abstract

Using a large dataset of over 100,000 Chinese firms created between 2000 and 2006, we explore whether there is a link between innovation effort (R&D) or innovation output (the share of innovative sales) and the firm's duration of survival. We estimate a complementary log-log model with time-varying explanatory variables controlling for individual heterogeneity. We find that innovative firms tend to survive longer, more so because of R&D than because of introducing new products. There seems to be an inverted-U relationship between R&D or innovation output and long-term survival, suggesting that too much R&D or product innovation can cause firms to die, perhaps because of excessive risk. Survival has a cyclical behaviour, and it varies across provinces. It also varies with ownership. State-owned firms have a higher hazard rate than privately-owned firms, which have a higher hazard rate than foreign-owned firms.

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Bibliographic Info

Paper provided by United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT) in its series MERIT Working Papers with number 057.

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Date of creation: 2013
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Handle: RePEc:unm:unumer:2013057

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Keywords: firm survival; complementary log-log duration models; China; innovation;

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