Innovation failure and firm growth: dependence on firm size and age

This paper investigates whether a firm's failure in undertaking innovative activities can promote or hamper its growth. It conducts a two-stage regression for the determinants innovation failure and its impact on firm growth by analysing the data of firms in the Korean manufacturing sector. It finds that firms are likely to fail in innovation when they have either low or extremely high levels of R&D intensity, conduct cooperative R&D, or face financial constraints. In addition, it finds that under these conditions, failed innovators have lower rates of growth than successful innovators, but also that firm size and age moderate the negative effect of innovation failure on firm growth. These findings imply that the impact of innovation failure on firm growth differs depending upon internal resources and resilience capability.