Firm Age and Innovation
38 Pages Posted: 29 Jul 2005
There are 2 versions of this paper
Firm Age and Innovation
Firm Age and Innovation
Date Written: July 5, 2005
Abstract
We study the firm-level dynamics of technological innovation. Specifically, we examine how firm age affects the technical quality of innovations and if firm age has differential effects on innovation quality depending on the nature of technology. Using data on 180,500 U.S. patents of COMPUSTAT firms applied for during 1984-94, we find that firm age is significantly and negatively related to technical quality. Furthermore, we find that this negative effect is significantly greater in areas with high levels of technological activity. The results remain robust to variations in samples and specification methods, and hold both in firm-level and patent-level analyses. Finally, the economic implication of this age effect appears to be substantial. One year of firm aging reduces the positive impact of a 10% increase in R&D intensity on the firm's market value by more than 3%.
Keywords: Innovation, Patents
JEL Classification: O30, O31
Suggested Citation: Suggested Citation