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Survivor: The Role of Innovation in Firms' Survival

  • E. Cefis
  • O. Marsili

This paper explores the relationship between innovation and the survival of manufacturing firms in the Netherlands. The determinants of the survival probability of a firm, traditionally identified in the size and age of a firm, are extended to include the ability of a firm to introduce an innovation in the market. The empirical analysis combines economic and demographic data from the Business Register of the population of firms active in the Netherlands with data on innovation derived from the second Community Innovation Survey. The survival probability of a firm is estimated by using a non-parametric approach: Transition Probability Matrices were calculating over different time periods. We observe that, in general, innovation has a positive and significant effect on firms survival that increases as time lengthens. Furthermore, our results confirm that small and young firms are those most exposed to the risk of exit, but at the same time those that benefit most of innovation to survive in the market, especially in the longer term.

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File URL: http://dspace.library.uu.nl/bitstream/handle/1874/7255/03-18.pdf
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Paper provided by Utrecht School of Economics in its series Working Papers with number 03-18.

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Date of creation: 01 Nov 2003
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Handle: RePEc:use:tkiwps:0318
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  1. Cefis, Elena, 2003. "Is there persistence in innovative activities?," International Journal of Industrial Organization, Elsevier, vol. 21(4), pages 489-515, April.
  2. Utterback, James M & Abernathy, William J, 1975. "A dynamic model of process and product innovation," Omega, Elsevier, vol. 3(6), pages 639-656, December.
  3. Jacques Mairesse & Pierre Mohnen, 2002. "Accounting for Innovation and Measuring Innovativeness: An Illustrative Framework and an Application," American Economic Review, American Economic Association, vol. 92(2), pages 226-230, May.
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  9. Malerba, Franco & Orsenigo, Luigi, 1999. "Technological entry, exit and survival: an empirical analysis of patent data," Research Policy, Elsevier, vol. 28(6), pages 643-660, August.
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  16. Mata, Jose & Portugal, Pedro, 1994. "Life Duration of New Firms," Journal of Industrial Economics, Wiley Blackwell, vol. 42(3), pages 227-45, September.
  17. Petri Rouvinen, 2002. "Characteristics of product and process innovators: some evidence from the Finnish innovation survey," Applied Economics Letters, Taylor & Francis Journals, vol. 9(9), pages 575-580.
  18. Richard E. Caves, 1998. "Industrial Organization and New Findings on the Turnover and Mobility of Firms," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 1947-1982, December.
  19. Audretsch, David B, 1997. "Technological Regimes, Industrial Demography and the Evolution of Industrial Structures," Industrial and Corporate Change, Oxford University Press, vol. 6(1), pages 49-82.
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  22. Pakes, Ariel & Ericson, Richard, 1998. "Empirical Implications of Alternative Models of Firm Dynamics," Journal of Economic Theory, Elsevier, vol. 79(1), pages 1-45, March.
  23. Audretsch, David B. & Santarelli, Enrico & Vivarelli, Marco, 1999. "Start-up size and industrial dynamics: some evidence from Italian manufacturing," International Journal of Industrial Organization, Elsevier, vol. 17(7), pages 965-983, October.
  24. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
  25. Dunne, Paul & Hughes, Alan, 1994. "Age, Size, Growth and Survival: UK Companies in the 1980s," Journal of Industrial Economics, Wiley Blackwell, vol. 42(2), pages 115-40, June.
  26. Gort, Michael & Klepper, Steven, 1982. "Time Paths in the Diffusion of Product Innovations," Economic Journal, Royal Economic Society, vol. 92(367), pages 630-53, September.
  27. Kaiser, Ulrich, 2002. "An empirical test of models explaining research expenditures and research cooperation: evidence for the German service sector," International Journal of Industrial Organization, Elsevier, vol. 20(6), pages 747-774, June.
  28. Geroski, P. A., 1995. "What do we know about entry?," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 421-440, December.
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