Risky innovation: The impact of internal and external R&D strategies upon the distribution of returns

José Mata and Martin Woerter

Research Policy, 2013, vol. 42, issue 2, 495-501

Abstract: External innovation increases the profits of the median firm, but also increases dispersion and the kurtosis of the distribution of profits. This means that external strategies are risky and may require a very large number of attempts before average returns are obtained. This puts smaller firms into a position of disproportionately high risk. Despite the earlier evidence that the rewards from innovation are positively skewed, we find no effect of innovation strategies upon the skewness of the distribution of firms’ profits.

Keywords: Risk; Innovation; Research and development; Firm performance (search for similar items in EconPapers)
JEL-codes: O30 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (30)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:respol:v:42:y:2013:i:2:p:495-501

DOI: 10.1016/j.respol.2012.08.004

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