We relate innovation to sales growth for incumbent firms in high-tech sectors. A firm, on average, experiences only modest growth and may grow for a number of reasons that may or may not be related to 'innovativeness'. However, given that the returns to innovation are highly skewed and that growth rates distributions are heavy-tailed, it may be misleading to use regression techniques that focus on the 'average effect for the average firm'. Using a quantile regression approach, we observe that innovation is of crucial importance for a handful of 'superstar' fast-growth firms. We also discuss policy implications of our results.JEL codes: O31, L25
This paper explores the relationship between firm growth, innovation and firm age. We hypothesize that young firms undertake riskier innovation activities and are more oriented towards employment growth than towards harvesting returns in the form of sales growth. Using an extensive sample of Community Innovation Survey for the period 2004-2010, we apply quantile regressions and a Heckman sample selection technique to study the impact of R&D activities on firm growth according to firm age. Our results show that R&D intensity is positively associated with firm growth. However, for young firms R&D shows an increasing influence across the quantiles, while for old firms R&D shows a stable or perhaps decreasing effect over the quantiles. Firm age shows a significant negative impact among young firms, while for the sample of old firms the impact of firm age becomes non-significant. Our Heckman estimations show the evolution of the impact of the R&D on firm growth confirming a significant impact on sales and productivity growth, while the impact is negligible for employment growth.
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