Innovation and survival of new firms in Chinese manufacturing, 2000-2006

Zhang, Mingqian and Mohnen, Pierre (2013). Innovation and survival of new firms in Chinese manufacturing, 2000-2006. UNU-MERIT.

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  • Author Zhang, Mingqian
    Mohnen, Pierre
    Title Innovation and survival of new firms in Chinese manufacturing, 2000-2006
    Publication Date 2013
    Publisher UNU-MERIT
    Abstract Using a large dataset of over 100,000 Chinese firms created between 2000 and 2006, we explore whether there is a link between innovation effort (R&D) or innovation output (the share of innovative sales) and the firm's duration of survival. We estimate a complementary log-log model with time-varying explanatory variables controlling for individual heterogeneity. We find that innovative firms tend to survive longer, more so because of R&D than because of introducing new products. There seems to be an inverted-U relationship between R&D or innovation output and long-term survival, suggesting that too much R&D or product innovation can cause firms to die, perhaps because of excessive risk. Survival has a cyclical behaviour, and it varies across provinces. It also varies with ownership. State-owned firms have a higher hazard rate than privately-owned firms, which have a higher hazard rate than foreign-owned firms.
    Keyword Firm survival
    Complementary log-log duration models
    China
    Innovation
    JEL L25
    O38
    Copyright Holder UNU-MERIT
    Copyright Year 2013
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    Created: Wed, 11 Dec 2013, 17:23:05 JST