Persistence of innovation in unstable environments: Continuity and change in the firm's innovative behavior

Abstract

The concept of persistence is generally used to define the positive relationship between past and present innovations, which is explained by feedback and accumulation processes triggered by the firm's past results. This paper states that changes in the economic or institutional conditions of the environment impact on the type of profitable innovations, and past innovations might not be suitable for the new environment. As a result, firm's innovative behavior might change, which means that the firm's set of decisions about engaging in the seek for innovations or not and, if so, the set of investments and capabilities it allocates to innovate could be modified. Empirical evidence is provided to reject the persistence hypothesis and to show that past innovations do not necessarily impact present ones. This paper examines the relationship between past and present innovations for a group of Argentinean firms during 1998–2006, which coincides with a period of macroeconomic instability. Results suggest that persistence has to be analyzed in terms of a dynamic firm's innovative behavior—regardless of its results—and how it allows the firm to accumulate competences and resources, which increases the odds of successfully responding to changes in the environment and continuing to innovate.