Innovation and firm survival over the industry life cycle

Abstract We analyze how patents, R&D subsidies, and subsidized R&D collaborations influence firm survival in the German photovoltaics industry. We collected data on 154 firms, covering the whole industry life cycle from the emergence of the industry in 1964 until 2016, including the industry’s shakeout and decline. We utilize time-variant data for these measures for innovation activity and use discrete-time hazard models to estimate their relationship with firm survival. Our results show that patenting increases a firm's probability of survival. In contrast to previous findings, process patents do not increase survival, but product patents do. Furthermore, we do not find a relationship between public R&D subsidies or subsidized R&D collaboration and firm survival. Other factors, such as entry timing, the dynamics in the industry, and demand-side policies, show expected relationships. We provide recommendations for managers and policy makers who seek to engage in innovative activities to enhance firm survival.