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

Research Policy, 2016, vol. 45, issue 7, 1474-1492

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 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (34)

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Working Paper: 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:eee:respol:v:45:y:2016:i:7:p:1474-1492

DOI: 10.1016/j.respol.2016.04.007

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