A Matter of Life and Death: Innovation and Firm Survival

This paper examines the effects of innovation on the survival of manufacturing firms in the Netherlands. The demographics of firms according to their innovative performance and type of innovation are traced by using the Business Register population of all firms active in the Netherlands and the Community Innovation Survey. Through estimation of a parametric duration model, we observe that firms do benefit of an innovation premium that extends their life expectancy, independent of firm- specific traits such as age and size. Especially process innovation seems to have a distinctive effect on survival. Furthermore, our results confirm that survival chances increase with age and the growth rate of a firm, the latter representing a more crucial factor than the initial size. Finally, sectors at high intensity of technology, that is, science based and specialised suppliers are most favourable environments to the survival of firms.Firm Survival, Innovation, Firms Exit, Duration models.

Schumpeter versus Kirzner: An empirical investigation of opportunity types

This paper empirically explores the distinction between Schumpeterian and Kirznerian opportunities by analyzing survey data of 184 high tech small business entrepreneurs. A multidimensional measure is developed documenting the extent in which entrepreneurial opportunities are either Schumpeterian or Kirznerian. It consists of five bipolar dimensions. We find that Schumpeterian opportunities are more likely to be pursued by innovative individuals with strong ambitions to grow their company. At the enterprise level, we find such opportunities in organizations with a strategic focus on proactive product development to satisfy future needs. Besides, Schumpeterian opportunities are found more often in relatively innovative organizations and pursued in rapidly growing markets. They seem to induce better growth in terms of sales and employment.

The role of codified sources of knowledge in innovation: empirical evidence from Dutch manufacturing

This paper explores ongoing debates about the role that codified forms of knowledge play in fostering firms' and countries' innovative performance. It aims to provide an empirical exploration of the use of codified sources of information for innovation at the sectoral level. Despite considerable interest in David and Foray's (1995) work on the codification of knowledge and the changing nature of innovation due to the use of information and communication technologies, there are relatively few empirical studies that probe the role of codified sources of information in the innovation process. Our goal is to assess 'how' important codified sources of information are for innovation for different sectors and to the innovation system in general. We explore the relationship between the use of codified sources by individual firms and increases in the 'distributional power' of an innovation system, a key component in David and Foray's codification argument. We then link the use of codified sources to different innovative strategies and characteristics of innovation at the firm level. The data used for the analysis is based on The Netherlands Community Innovation Survey (II) for the manufacturing sector. The data set covers 1997 firms in 11 major industries.Innovation, knowledge, manufacturing industries, codification

How do firms innovate?

This paper classifies Dutch innovative SMEs into four clusters with similar innovation patterns: supplier-dominated, client-driven, science-based and input-intensive firms. The classification is compiled using some new indicators that are particularly relevant to innovation in SMEs. We used the firm level as unit of classification; a departure from previous taxonomic studies. Doing so enabled us to assess the heterogeneity of firms within a particular sector. Our results indicate that differences between manufacturing and services sectors should not be exaggerated. Besides, firms are very diverse in how they handle innovation processes.

Going, Going, Gone. Innovation and Exit in Manufacturing Firms

This paper examines the effect of innovation on the risk of exit of a firm, distinguishing between different modes of exits. Innovation represents a resource and a capability that helps a firm to build competitive advantage and remain in the market. At the same time, the resources and capabilities of innovative firms make them an attractive target for the acquisition process of other firms, thereby increasing the likelihood of the exiting the market. We explore these effects empirically by linking data on innovation and exits for a large sample of manufacturing firms in the Netherlands. The results show that the effect of innovation on a firm's risk of exit differs according to the mode of exit and, in addition, it is shaped by the nature of the innovation. While a firm can lower its risk of failure by innovating in either products or processes, the introduction of a new product in the absence of innovation in the production process increases the risk of exit as a result of merger and acquisition

A Matter of Life and Death: Innovation and Firm Survival

This paper examines the effects of innovation on the survival of manufacturing firms in the Netherlands. The demographics of firms according to their innovative performance and type of innovation are traced by using the Business Register population of all firms active in the Netherlands and the Community Innovation Survey. Through estimation of a parametric duration model, we observe that firms do benefit of an innovation premium that extends their life expectancy, independent of firm- specific traits such as age and size. Especially process innovation seems to have a distinctive effect on survival. Furthermore, our results confirm that survival chances increase with age and the growth rate of a firm, the latter representing a more crucial factor than the initial size. Finally, sectors at high intensity of technology, that is, science based and specialised suppliers are most favourable environments to the survival of firms

The effects of mergers and acquisitions on the firm size distribution

This paper provides new empirical evidence on the effects of mergers and acquisitions (M&As) on the shape of the firm size distribution, by using data of the population of manufacturing firms in the Netherlands. Our analysis shows that M&As do not affect the size distribution when we consider the entire population of firms. When we focus on the firms involved in an M&A event, we observe a shift of the firm size distribution towards larger sizes. Firm size distribution becomes more concentrated around the mean, less skewed to the right hand side, and thinner at the tails as a whole. The shift toward higher sizes due to M&A is not uniform but affects firms of different sizes in different ways. While the number of firms in the lower tail decreased, the number of firms in the central size classes increased substantially and outweighed the increase in the number (and mean size) of firms in the upper tail of the distribution (consequently the overall market concentration measured by the Herfindahl index declines). M&As lead to a departure from log-normality of the firm size distribution, suggesting that external growth does not follow Gibrat's law. Our counterfactual analysis highlights that only internal growth does not affect the shape of the size distribution of firms. On the contrary, it suggests that the change in the size distribution is almost entirely due to the external growth of the firms