Does innovativeness reduce startup survival rates

By Ari Hyytinen, Mika Pajarinen, Petri Rouvinen. 2015

330 citations recorded by the source corpus.

There are two competing hypotheses explaining how innovativeness influences the survival of startups: On the one hand, innovativeness is argued to foster survival-enhancing attributes (e.g., market power and cost efficiency) and capabilities (e.g., absorptive capacity). On the other hand, an innovative startup faces (and bears the associated risks of) liabilities of newness and smallness that exceed those of its non-innovative counterparts. The available empirical literature addressing this theoretical tension mostly supports the former hypothesis; we suggest that this finding is, in part, driven by the common practice of employing an ex post measure that already embodies a degree of success in innovativeness. We use an ex ante measure and find that a startup's innovativeness is negatively associated with its subsequent survival. We also find that entrepreneurs' greater appetite for risk magnifies this negative association. These findings imply that pursuing innovations is not necessarily associated with survival during the early stages of firm development and entails a more complicated start-up process.

Subfields: Accounting, Economics and Econometrics, Management of Technology and Innovation

View Paper: https://www.semanticscholar.org/paper/5e7c5a1fbab124d671583434684eb8883b798221

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Citations in the corpus

Meeting, mating, and intermediating: How incubators can overcome weak network problems in entrepreneurial ecosystems (2020, methodology): “The number 200 is based on previous studies’ average empirical survival rates for startups, which commonly vary between 56% and 67% after three years (Boyer and Blazy, 2014; Eurostat, 2017; Hyytinen et al., 2015).”
Personality Traits of Entrepreneurs: A Review of Recent Literature (2018, positive): “Hyytinen et al. (2015) use an innovative approach that combines interview data from an early startup period with national business register data to track firm survival over time.”
The Schumpeterian entrepreneur: a review of the empirical evidence on the antecedents, behaviour and consequences of innovative entrepreneurship (2017, neutral): “Multiple studies investigate the effect of innovation on firm survival (e.g. Boyer and Blazy 2014; Tsvetkova, Thill, and Strumsky 2014; Howell 2015; Hyytinen, Pajarinen, and Rouvinen 2015), which has also been briefly discussed in the subsection on innovation and firm exit.”