Innovation, Collaboration in Innovation and the Growth Performance of Finnish Firms

The aim of this study is to analyse the dynamic effects of innovation and collaboration in innovation on the growth performance of Finnish firms. We are mainly interested in the long run (5 years) average annual growth rates of innovative firms. We first review the literature on growth theories of firms and on the empirical research on innovation and firm growth. Then we conduct partial panel data analyses of the determinants of growth in sales, employment and productivity for firms included in the Finnish Community Innovation Surveys (CIS). Besides collaboration in innovation, we also utilize existing data on the corporate spin-offs of large manufacturing firms. We use two waves of the CIS, CIS2 and CIS3, and link them separately with growth performance data taken from the Business Register, with patent data taken from the Patent Register and with education data taken from the Employee-Employer Dataset. We use the Heckman two-step selection model together with a single-equation OLS and ML estimation method for the long run growth rates of firms, and a variant of the Crépon, Duguet, Mai-resse (CDM) structural model for the productivity levels of firms. We obtain only partial evidence that process and product innovations affect significantly and positively the post-innovation total sales growth among innovation active firms. Similarly, we find only partial evidence that collaboration in innovation with foreign competitors and being established as spin-offs of large firms affects the total sales growth. Nonetheless, the relationship between the occurrence of innovations and the future productivity growth of innovative firms comes out as a robust result.