Knowledge, Technology and Internationalization
New Horizons in Regional Science series
Edited by Charlie Karlsson, Urban Gråsjö and Sofia Wixe
Chapter 1: R & D investments and firm survival across regions
Innovation is a key factor in modern economies and many companies invest in R & D to obtain such innovations, with both public and private resources. The objective is to achieve and increase productivity and economic growth, but it could also provide a guarantee of long-run performance. The present work explores the relationship between R & D and firm survival. The hypothesis that R & D activity is a positive factor for firm survival is contrasted using data from the Encuesta Sobre Estrategias Empresariales (ESEE – Business Strategies Survey) for the period 1991–2010 and for a sample of Spanish manufacturing firms. With these data, a Cox proportional hazard model is estimated. The results show the existence of a positive relationship between R & D expenditure and survival probability, with differences depending on the environment. Specifically, we show that increasing the ratio of R & D to turnover lowers exit probability, controlling for other factors. The different environments are defined as combinations of both technological (or not) regions and sectors in which firms operate.