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Going, going, gone. Exit forms and the innovative capabilities of firms

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  • Cefis, Elena
  • Marsili, Orietta

Abstract

Although innovation is essential to build a competitive advantage and survive in the long run, some firms choose to exit, through mergers and acquisitions (M&As), or radically change their business portfolio and identity. This paper examines how innovative capabilities influence the decision of a firm to exit, among business closure, M&A, and radical restructuring. Using an analysis of a large and rich panel of Dutch manufacturing firms, we find that product and process innovation are equally important to lower the probability to close down activities, and this effect is stronger when product and process innovations are pursed in combination. We also find that process innovation reduces the probability of exit by radical restructuring, while product innovation, when not supported by process innovation, especially increases the probability of exit by M&As. Our findings suggest that exit strategies are intimately bound to the nature and synergies of innovative efforts.

Suggested Citation

  • Cefis, Elena & Marsili, Orietta, 2012. "Going, going, gone. Exit forms and the innovative capabilities of firms," Research Policy, Elsevier, vol. 41(5), pages 795-807.
  • Handle: RePEc:eee:respol:v:41:y:2012:i:5:p:795-807
    DOI: 10.1016/j.respol.2012.01.006
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    More about this item

    Keywords

    Firm exit; Merger and acquisition (M&A); Restructuring; Product and process innovation; Competing risks model;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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