The Roles of R&D in New Firm Growth

27 Pages Posted: 8 Oct 2013 Last revised: 14 Mar 2015

See all articles by Erik Stam

Erik Stam

Utrecht University - School of Economics; Utrecht University - Tjalling C. Koopmans Research Institute

Karl Wennberg

Linkoping University - Institute for Analytical Sociology (IAS)

Date Written: May 7, 2009

Abstract

Innovative start-ups are an important driver of economic growth. This article presents empirical evidence on the effects of R&D on new product development, inter-firm alliances and employment growth during the early life course of firms. We use a dataset that contains a sample of new firms that is representative for the whole population of start-ups. This dataset covers the first six years of the life course of firms. R&D reveals to play several roles during the early life course of high tech as well as high growth firms. The effect of initial R&D on high tech firm growth runs via increasing levels of inter-firm alliances in the first post-entry years. R&D efforts enable the exploitation of external knowledge. Initial R&D also stimulates new product development later on in the life course of high tech firms, but this does not seem to affect firm growth. R&D does not affect the growth rate of new low tech firms, which seems to be driven mainly by the growth ambitions of the founding entrepreneur. The results show that R&D matters for a limited but important set of new high tech and high growth firms, which are key in innovation and entrepreneurship policies.

Keywords: New Firms, Innovation, R&D, firm growth, alliances, product development

JEL Classification: D21, L23, L25, L26, M13

Suggested Citation

Stam, Erik and Wennberg, Karl, The Roles of R&D in New Firm Growth (May 7, 2009). Small Business Economics, Vol. 33, No. 1, 2009, Available at SSRN: https://ssrn.com/abstract=2337032

Erik Stam

Utrecht University - School of Economics ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, +31 30 253 7373 3584 EC
Netherlands

Utrecht University - Tjalling C. Koopmans Research Institute ( email )

Adam Smith Building
Kriekenpitplein 21-22
Utrecht, 3584 EC
Netherlands

Karl Wennberg (Contact Author)

Linkoping University - Institute for Analytical Sociology (IAS) ( email )

Norrköping, 601 74
Sweden

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