Publication on innovation and firm survival in the German photovoltaics industry

The study by Ann Hipp (Thünen Institute) and Martin Kalthaus (University of Southern Denmark) – published in the journal Small Business Economics – examines the influence of innovation activities on a firm’s probability of survival using the example of the German photovoltaics industry for the period from 1964 to 2016.
The results show that those firms that patent their inventions increase their probability of survival in an industry. However, this finding applies only to the filing of product-related patents. In contrast, R&D subsidies and subsidized R&D collaborations do not increase the survival of firms over the industry life cycle. In their quantitative analysis, the authors provide detailed insights into how product patents in particular are important for firm survival, but process patents are not. Furthermore, the authors do not find survival-enhancing effects from receiving different kinds of R&D subsidies, despite their substantial amount.  
Based on the empirical findings, the authors recommend that managers engage in patenting, particularly that of product-related innovative activities. For policy makers, the authors suggest a reassessment of R&D subsidy strategies and point to the high fluctuation of subsidies over time as a potential problem.

The study was published in the journal Small Business Economics under the title “Innovation and Firm Survival over the Industry Life Cycle.”

Contact: Dr. Ann Hipp