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R&D investments and firm survival across regions

María Jesús Abellán Madrid, Antonio García-Tabuenca () and Cristina Suarez

Chapter 1 in Innovation and Entrepreneurship in the Global Economy, 2015, pp 21-43 from Edward Elgar Publishing

Abstract: Innovation is a key factor in modern economies and many companies invest in R&D to obtain such innovations, with both public and private resources. The objective is to achieve and increase productivity and economic growth, but it could also provide a guarantee of long-run performance. The present work explores the relationship between R&D and firm survival. The hypothesis that R&D activity is a positive factor for firm survival is contrasted using data from the Encuesta Sobre Estrategias Empresariales (ESEE – Business Strategies Survey) for the period 1991–2010 and for a sample of Spanish manufacturing firms. With these data, a Cox proportional hazard model is estimated. The results show the existence of a positive relationship between R&D expenditure and survival probability, with differences depending on the environment. Specifically, we show that increasing the ratio of R&D to turnover lowers exit probability, controlling for other factors. The different environments are defined as combinations of both technological (or not) regions and sectors in which firms operate.

Keywords: Business and Management; Economics and Finance; Environment; Geography; Innovations and Technology; Urban and Regional Studies (search for similar items in EconPapers)
Date: 2015
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