Innovation and the Determinants of Company Survival

Posted: 29 Mar 2010 Last revised: 29 Jul 2014

See all articles by Hielke Buddelmeyer

Hielke Buddelmeyer

Melbourne Institute; IZA Institute of Labor Economics

Paul H. Jensen

University of Melbourne - Melbourne Institute of Applied Economic and Social Research

Elizabeth Webster

Swinburne University of Technology; University of Melbourne - Melbourne Institute: Applied Economic & Social Research

Date Written: April 1, 2010

Abstract

Although many companies compete through the development of new technologies and products, it is well known that innovation is inherently risky and therefore may increase the ex ante likelihood of both exceptional company performance and bankruptcy. However, existing empirical studies consistently find a positive relationship between innovative activity and company survival. We argue that this conclusion may be a result of a simple selection effect caused by the degree of uncertainty embodied in the innovation proxies used. Using a panel of almost 300,000 Australian companies, we estimate a piecewise-constant exponential hazard rate model to examine the relationship between innovation and company survival. As expected, we find that the degree of uncertainty embodied in different innovation proxies does shape the pattern of company survival.

JEL Classification: C41, L10, O31

Suggested Citation

Buddelmeyer, Hielke and Jensen, Paul H. and Webster, Elizabeth M., Innovation and the Determinants of Company Survival (April 1, 2010). Oxford Economic Papers, Vol. 62, No. 2, pp. 261-285, 2010, Available at SSRN: https://ssrn.com/abstract=1578728 or http://dx.doi.org/gpp012

Hielke Buddelmeyer (Contact Author)

Melbourne Institute ( email )

161 Barry Street
Level 7
Parkville, Victoria 3010
Australia
+61383442091 (Phone)

HOME PAGE: http://www.melbourneinstitute.com

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Paul H. Jensen

University of Melbourne - Melbourne Institute of Applied Economic and Social Research ( email )

Level 5, FBE Building, 111 Barry Street
Parkville, Victoria 3010
Australia

Elizabeth M. Webster

Swinburne University of Technology ( email )

Cnr Wakefield and William Streets, Hawthorn Victor
3122 Victoria, Victoria 3122
Australia

University of Melbourne - Melbourne Institute: Applied Economic & Social Research ( email )

Level 5, FBE Building, 111 Barry Street
Parkville, Victoria 3010
Australia

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