Survivor: The role of innovation in firms’ survival

Abstract

This paper explores the relationship between innovation and the survival of manufacturing firms in the Netherlands. The determinants of the survival probability of a firm, traditionally identified in the size and age of a firm, are extended to include the ability of a firm to introduce an innovation in the market. The empirical analysis combines economic and demographic data from the Business Register of the population of firms active in the Netherlands with data on innovation derived from the second Community Innovation Survey. The survival probability of a firm is estimated by using a non-parametric approach: Transition Probability Matrices were calculating over different time periods. We observe that, in general, innovation has a positive and significant effect on firms' survival that increases as time lengthens. Furthermore, our results confirm that small and young firms are those most exposed to the risk of exit, but at the same time those that benefit most of innovation to survive in the market, especially in the longer term.

Product Innovation and Survival in a High-Tech Industry

“…In fast changing industries, soon after entry firms have a lower probability of survival, but once the initial period has been passed, their life expectancy increases significantly (Audretsch, 1995;Audretsch and Mahmood, 1999). Cefis and Marsili (2006) find that innovative firms are more likely to survive than are non-innovative firms. Finally, the timing of innovation (Christensen, Suarez, and Utterback, 1998), commercial strategy and relatedness among business lines (Mitchell, 1991;Willard and Cooper, 1985), and 1 A non-exhaustive list of contributions includes, among others, Haltiwanger (1997), Foster, Haltiwanger, the nature of the technological regime (Audretsch, 1991) have a strong influence on the life duration of new firms.…”

Barriers to innovation in service SMEs: evidence from Mexico

“…Therefore, service SMEs that act accordingly will have more possibilities to significantly increase their level of performance and competitiveness (de Brentani, 1989;Mohammed-Salleh & Easingwood, 1993;Griffin, 1997;Cefis & Marsili, 2006). This paper investigates the effects of external environmental, financial and human barriers on innovation in Mexican service SMEs.…”

The State of Innovation and Entrepreneurship Research

“…Those enterprises that survive do so because they are capable of regular and focused change [6,7]. New ventures that innovate are able to offer new or different goods or services to the market, enabling them to differentiate themselves from their competitors.…”