Innovation, Survival and Performance of Canadian Manufacturing Plants

Abstract

This paper examines the determinants of innovation and the role of innovation in productivity growth, shifts in market share and survival in the Canadian manufacturing sector. The paper presents a model that examines the effect of innovation on plant performance and plant survival. It uses a unique data set that allows us to develop a detailed time profile of plant performance both before and after the introduction of an innovation. We find strong evidence that labour productivity growth is faster and survival rates higher after the introduction of a process innovation. Process innovation is also linked to gain in market shares through its effect on productivity growth. In contrast, product innovation appears to have little impact on plant performance and a negative impact on plant survival. We find that R&D, technology competencies and past innovation are linked to higher rates of innovation. Previous nnovation experience is linked to innovation but previous growth is not.