Firm Age and Innovation

38 Pages Posted: 29 Jul 2005

See all articles by Natarajan Balasubramanian

Natarajan Balasubramanian

Syracuse University - Whitman School of Management

Jeongsik Lee

University of California, Los Angeles (UCLA) - Policy Area

Multiple version iconThere are 2 versions of this paper

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

Balasubramanian, Natarajan and Lee, Jeongsik, Firm Age and Innovation (July 5, 2005). Available at SSRN: https://ssrn.com/abstract=762566 or http://dx.doi.org/10.2139/ssrn.762566

Natarajan Balasubramanian (Contact Author)

Syracuse University - Whitman School of Management ( email )

United States

Jeongsik Lee

University of California, Los Angeles (UCLA) - Policy Area ( email )

110 Westwood Plaza
Los Angeles, CA 90095
United States

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