Innovation and the Determinants of Firm Survival

Hielke Buddelmeyer (), Paul Jensen and Elizabeth Webster ()
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Hielke Buddelmeyer: Melbourne Institute of Applied Economic and Social Research

No 2386, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: While many firms compete through the development of new technologies and products, it is well known that new-to-the-world innovation is inherently risky and therefore may increase the probability of firm death. However, many existing studies consistently find a negative association between innovative activity and firm death. We argue that this may occur because authors fail to distinguish between innovation investments and innovation capital. Using an unbalanced panel of over 290,000 Australian companies, we estimate a piecewise-constant exponential hazard rate model to examine the relationship between innovation and survival and find that current innovation investments increase the probability of death while innovation capital lowers it.

Keywords: innovation; firm survival (search for similar items in EconPapers)
JEL-codes: C41 O31 O32 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2006-10
New Economics Papers: this item is included in nep-bec, nep-cse, nep-ent and nep-ino
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Published - revised version published as 'Innovation and the determinants of company survival' in: Oxford Economics Papers, 2010, 62 (2), 261-285

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Working Paper: Innovation and the Determinants of Firm Survival (2006)
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