Inverted-U relationship between R&D intensity and survival: evidence on scale and complementarity effects in UK data

Mehmet Ugur (), Eshref Trushin and Edna Solomon

No 15510, Greenwich Papers in Political Economy from University of Greenwich, Greenwich Political Economy Research Centre

Abstract: Existing evidence on the relationship between R&D intensity and firm survival is varied and often conflicting. We argue that this may be due to overlooking R&D scale effects and complementarity between R&D intensity and market concentration. Drawing on Schumpeterian models of competition and innovation, we address these issues by developing a formal model of firm survival and using a panel dataset of 37,930 of R&D-active UK firms over 1998–2012. We report the following findings: (i) the relationship between R&D intensity and firm survival follows an inverted-U pattern that reflects diminishing scale effects; (ii) R&D intensity and market concentration are complements in that R&D-active firms have longer survival time if they are in more concentrated industries; and (iii) creative destruction as proxied by median R&D intensity in the industry and the premium on business lending have negative effects on firm survival. Other findings concerning age, size, productivity, relative growth, Pavitt technology classes and the macroeconomic environment are in line with the existing literature. The results are strongly or moderately robust to different samples, stepwise estimations, and controls for frailty and left truncation

Keywords: R&D; Innovation; Firm dynamics; Survival analysis (search for similar items in EconPapers)
JEL-codes: C41 D21 D22 L1 O3 (search for similar items in EconPapers)
Date: 2016-05-10
New Economics Papers: this item is included in nep-bec, nep-com, nep-cse, nep-eff, nep-eur, nep-ino, nep-sbm and nep-tid
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Citations: View citations in EconPapers (33)

Published in Research Policy 7.45(2016): pp. 1474-1492

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http://gala.gre.ac.uk/id/eprint/15510/8/15510_Solo ... F%20OA%29%202016.pdf

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Journal Article: Inverted-U relationship between R&D intensity and survival: Evidence on scale and complementarity effects in UK data (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:gpe:wpaper:15510

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