R&D drivers and age: Are young firms different?

Abstract

This study examines the relationship between R&D drivers and firm's age, taking into account the autoregressive nature of innovation.Using a large longitudinal dataset comprising Spanish manufacturing firms over the period 1990–2008, we find that previous R&D experience is a fundamental determinant for mature and young firms, albeit to a smaller extent in the case of younger firms, suggesting that their innovation behaviour is less persistent and more erratic.Moreover, our results suggest that firm and market characteristics play a distinct role in boosting the innovation activity of firms of different ages. In particular, while market concentration and the degree of product diversification are found to be important in fostering R&D activities in the subsample of mature firms only, young firms’ spending on R&D appears to be more sensitive to demand-pull variables.These results have been obtained using a recently proposed dynamic type-2 tobit estimator, which accounts for individual effects and efficiently handles the initial conditions problem.