Innovation and survival of new firms in Chinese manufacturing, 2000-2006
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 RD or innovation output the share of innovative sales and the firms 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 RD than because of introducing new products. There seems to be an inverted-U relationship between RD or innovation output and long-term survival, suggesting that too much RD or product innovation can cause firms to die, perhaps because of excessive risk. Survival has a cyclicalbehaviour, 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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