R&D, firm growth and the role of innovation persistence: an analysis of Finnish SMEs and large firms

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    R&D investment and growth in SMEs and large firms relate in a complex way. This paper analyses what role persistence of innovation output plays in shaping that relationship. We apply a vector auto-regression model to Finnish firm-level data and summarize the lead-lag relationship and complex co-movements of R&D growth and firm growth series. We found only continuous product and process innovators to have positive associations between R&D growth and sales growth. Also the associations between sales growth and subsequent R&D growth were stronger for continuous innovators than for occasional innovators, but only for product innovators. In the case of process innovators it is the occasional innovators that exhibit a stronger association between sales growth and subsequent R&D growth. In addition, our results vary between large and small firms. We express the need for further research on innovation dynamics and growth of SMEs analysing the interactions between different innovation activities.
    Original languageEnglish
    Pages (from-to)767-785
    Number of pages19
    JournalSmall Business Economics
    Issue number4
    Publication statusPublished - 2014
    MoE publication typeA1 Journal article-refereed



    • Finland
    • firm growth
    • innovation
    • panel VAR
    • R&D
    • SME

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