Abstract
We investigate the survival performance of new technology-based firms (NTBFs) over the business cycle and compare them against other entrepreneurial firms. Our data comprise the entire population of entrepreneurial firms entering the Swedish economy from 1991 to 2002, which we follow until 2007. Discrete-time duration models are employed to investigate whether the business cycle impacts differently on the survival likelihood of NTBFs vis-à-vis other entrepreneurial firms. Our main findings are three. First, NTBFs generally experience a lower hazard rate compared to other entrepreneurial firms, which is interpreted as a sign of their high ‘quality.’ Second, all entrepreneurial firms are sensitive to and follow a pro-cyclical pattern of survival likelihood over the business cycle. Three, when comparing NTBFs with the broader group of other entrepreneurial firms, we find that NTBFs are more sensitive to business cycle fluctuations. The above results come with a qualification, though. The sensitivity during the business cycle mainly pertains to self-employed NTBFs. Also, NTBFs’ higher survivability is only linked to not being characterized as self-employed.
Highlights
Endogenous growth theory has given a central role to R&D and innovation (e.g. Romer 1987, 1990; Aghion and Howitt 1992), though rarely addressed its interaction with entrepreneurship (Braunerhjelm et al 2010)
We investigate the survival performance of new technology-based firms (NTBFs) over the business cycle and compare them against other entrepreneurial firms
We examine whether NTBFs have a higher survival probability and respond differently to macroeconomic shocks than other entrepreneurial firms
Summary
Endogenous growth theory has given a central role to R&D and innovation (e.g. Romer 1987, 1990; Aghion and Howitt 1992), though rarely addressed its interaction with entrepreneurship (Braunerhjelm et al 2010). New technology-based firms (NTBFs) are widely held as agents that introduce innovation, promote technology transfer, intensify market competition, and speed up industrial evolution and induce economic growth (Schumpeter 1934; Saxenian 1994; Lindholm Dahlstrand 1997; Autio and Parhankangas 1998; Licht and Nerlinger 1998; Storey and Tether 1998; Rickne and Jacobsson 1999) Such firms can be seen as an expression of ‘quality.’ While the link from inventive activity to growth has been intensively studied, the reverse direction of effects, how growth impacts on inventive activity, has not. The key interest in this article is whether one expression of such quality entrepreneurship, NTBFs, is affected differently by the business cycle in terms of survivability than other entrepreneurial firms.
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