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

M. Zhang, P. Mohnen

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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.
Original languageEnglish
Place of PublicationMaastricht
PublisherUNU-MERIT
Number of pages42
Publication statusPublished - 1 Jan 2013

Publication series

SeriesUNU-MERIT Working Papers
Number057

Cite this

Zhang, M., & Mohnen, P. (2013). Innovation and survival of new firms in Chinese manufacturing, 2000-2006. UNU-MERIT. UNU-MERIT Working Papers, No. 057