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Innovation and the Determinants of Firm Survival

Author

Listed:
  • Hielke Buddelmeyer

    (Melbourne Institute of Applied Economic and Social Research and Centre for Microeconometrics, The University of Melbourne and IZA Bonn)

  • Paul H. Jensen

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne and Intellectual Property Research Institute of Australia, The University of Melbourne)

  • Elizabeth Webster

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne and Intellectual Property Research Institute of Australia, The University of Melbourne)

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.

Suggested Citation

  • Hielke Buddelmeyer & Paul H. Jensen & Elizabeth Webster, 2006. "Innovation and the Determinants of Firm Survival," Melbourne Institute Working Paper Series wp2006n15, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    • Handle: RePEc:iae:iaewps:wp2006n15
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    File URL: http://melbourneinstitute.unimelb.edu.au/downloads/working_paper_series/wp2006n15.pdf
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    References listed on IDEAS

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    Cited by:

    1. Avraam Papastathopoulos & Christina C. Beneki, 2011. "Predicting Innovation Activity In European Manufacturing Firms: A Multi-Country Empirical Study," International Journal of Management and Marketing Research, The Institute for Business and Finance Research, vol. 4(2), pages 49-65.
    2. Enrico Santarelli & Marco Vivarelli, 2007. "Entrepreneurship and the process of firms’ entry, survival and growth," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 16(3), pages 455-488, June.
    3. Ornella Wanda Maietta & Fernanda Mazzotta, 2018. "Firm Survival and Innovation: Knowledge Context Matters!," CSEF Working Papers 496, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    4. Deng, Ziliang & Guo, Honglin & Zhang, Weifu & Wang, Chengqi, 2014. "Innovation and survival of exporters: A contingency perspective," International Business Review, Elsevier, vol. 23(2), pages 396-406.
    5. Maxwell Sandada & Lorraine Mangwandi, 2015. "An Assessment of the Influence of Selected on the Performance of Small to Medium Sized Family Owned Businesses in the Zimbabwe Retail Sector," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 11(5), pages 5-16, October.
    6. Zhang, Dongyang & Zhuge, Liqun & Freeman, Richard B., 2020. "Firm dynamics of hi-tech start-ups: Does innovation matter?," China Economic Review, Elsevier, vol. 59(C).
    7. Eko Atmadji, 2012. "Fuel price increase and manufacturing firms survival in Indonesia," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 4(1), pages 2-14, April.

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    More about this item

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies

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