The Risks of Innovation: Are Innovating Firms Less Likely to Die?

By A. Fernandes, Caroline Paunov. Review of Economics and Statistics, 2012

125 citations recorded by the source corpus.

Abstract While innovation matters for competitiveness, it may expose firms to survival risks. Using plant-product data for Chile and discretetime hazard models, we show that innovating plants have a lower hazard of exit. However, risk has a strong impact on the innovation-exit relationship: only innovators that retain diversified sources of revenue or face lower market risk are less likely to die. Single-product innovators are at greater risk of exiting. Exposure to technical risk does not affect exit probabilities differentially. We provide tentative evidence that singleproduct innovators have higher profits, which helps to rationalize their innovation decision despite the increased risk of exit.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/106cde849d4a6c631a89c82f2332346be2bc829b

Citations in the corpus

• Inverted-U relationship between R&D intensity and survival : evidence on scale and complementarity effects in UK data. (2016, unknown): “Secondly, R&D investment may not generate commercially successful innovation outcomes and/or the firm may fail to diversify its revenue streams at the same pace as its investment in innovation (Fernandes and Paunov, 2015).”
• Did the global financial crisis impact firms' innovation performance? The role of internal and external knowledge capabilities in high and low tech industries (2018, unknown): “…activities become increasingly risky for firms due to the inherent uncertainties in the commercialisation of new products and services and the fact that they could fail to bring sufficiently high payoffs to recoup production costs (Cruz-Castro and Sanz-Menéndez, 2016; Fernandes and Paunov, 2015).”