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Innovation and the determinants of company survival

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  • Hielke Buddelmeyer
  • Paul H. Jensen
  • Elizabeth Webster

Abstract

Although many companies compete through the development of new technologies and products, it is well known that innovation is inherently risky and therefore may increase the ex ante likelihood of both exceptional company performance and bankruptcy. However, existing empirical studies consistently find a positive relationship between innovative activity and company survival. We argue that this conclusion may be a result of a simple selection effect caused by the degree of uncertainty embodied in the innovation proxies used. Using a panel of almost 300,000 Australian companies, we estimate a piecewise-constant exponential hazard rate model to examine the relationship between innovation and company survival. As expected, we find that the degree of uncertainty embodied in different innovation proxies does shape the pattern of company survival. Copyright 2010 , Oxford University Press.

Suggested Citation

  • Hielke Buddelmeyer & Paul H. Jensen & Elizabeth Webster, 2010. "Innovation and the determinants of company survival," Oxford Economic Papers, Oxford University Press, vol. 62(2), pages 261-285, April.
  • Handle: RePEc:oup:oxecpp:v:62:y:2010:i:2:p:261-285
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    File URL: http://hdl.handle.net/10.1093/oep/gpp012
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