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Too big to succeed or too big to fail?

Arthur Fishman (), Hadas Don-Yehiya () and Amnon Schreiber ()
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Arthur Fishman: Bar Ilan University
Hadas Don-Yehiya: Bar Ilan University
Amnon Schreiber: Bar Ilan University

Small Business Economics, 2018, vol. 51, issue 4, 811-822

Abstract: Abstract It is often argued that smaller/younger firms are more innovative than older/larger firms—the latter may be “too big to succeed.” We show in the context of a simple industry model with consumer search frictions why evidence suggesting that smaller or younger firms are more successful at innovation may be subject to sample selection bias. Specifically, smaller more recent entrants may appear to innovate more successfully simply because unsuccessful larger incumbent firms’ size advantage enables them to survive when unsuccessful smaller ones cannot—they may be “too big to fail.”

Keywords: Innovation; Firm size; Firm survival; First-mover advantage; Search frictions (search for similar items in EconPapers)
JEL-codes: L11 L26 (search for similar items in EconPapers)
Date: 2018
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