This paper explores the relationship between innovation and the survival of manufacturing firms in the Netherlands. The determinants of the survival probability of a firm, traditionally identified in the size and age of a firm, are extended to include the ability of a firm to introduce an innovation in the market. The empirical analysis combines economic and demographic data from the Business Register of the population of firms active in the Netherlands with data on innovation derived from the second Community Innovation Survey. The survival probability of a firm is estimated by using a non-parametric approach: Transition Probability Matrices were calculating over different time periods. We observe that, in general, innovation has a positive and significant effect on firms' survival that increases as time lengthens. Furthermore, our results confirm that small and young firms are those most exposed to the risk of exit, but at the same time those that benefit most of innovation to survive in the market, especially in the longer term.

This paper examines the effects of innovation on the survival of manufacturing firms in the Netherlands. The demographics of firms according to their innovative performance and type of innovation are traced by using the Business Register population of all firms active in the Netherlands and the Community Innovation Survey. Through estimation of a parametric duration model, we observe that firms do benefit of an innovation premium that extends their life expectancy, independent of firm-specific traits such as age and size. Especially process innovation seems to have a distinctive effect on survival. Furthermore, our results confirm that survival chances increase with age and the growth rate of a firm, the latter representing a more crucial factor than the initial size. Finally, sectors at high intensity of technology, that is, science based and specialised suppliers are most favourable environments to the survival of firms.

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Although innovation is essential to build a competitive advantage and survive in the long run, some firms choose to exit, through mergers and acquisitions (M&As), or radically change their business portfolio and identity. This paper examines how innovative capabilities influence the decision of a firm to exit, among business closure, M&A, and radical restructuring. Using an analysis of a large and rich panel of Dutch manufacturing firms, we find that product and process innovation are equally important to lower the probability to close down activities, and this effect is stronger when product and process innovations are pursed in combination. We also find that process innovation reduces the probability of exit by radical restructuring, while product innovation, when not supported by process innovation, especially increases the probability of exit by M&As. Our findings suggest that exit strategies are intimately bound to the nature and synergies of innovative efforts.

This paper examines the way that the exit behavior of entrepreneurial firms is shaped by their innovative capabilities, and the technology environment in which they operate. We distinguish between exit by closing down activity and exit by merger or acquisition (M&A). Using a large sample of Dutch manufacturing firms, we explore the relationship between firm exit, age and innovative capabilities, in high and low innovation intensive industries. We find that for entrepreneurial firms, innovation may go some way towards compensating for the liability of newness, but also makes them more attractive M&A targets. More specifically, entrepreneurial firms in high-tech industries do not seem to improve their chances of survival by innovating; when technological change is rapid, innovation, especially in products, is necessary to participate in the innovation race in an industry, but is not sufficient to guarantee survival. In contrast, in low-tech industries, process innovation is a critical condition for the survival of entrepreneurial firms. In this context, entrepreneurial firms that are able to bring new product ideas, introducing 'exceptional'

This paper explores the empirical link between, on the one hand, innovation and, on the other hand, industrial structure and dynamics in The Netherlands. We use the concept of 'technological regimes' as the guiding framework to interpret this relationship. The data are drawn from the Production Statistics and the Business Register of manufacturing firms in The Netherlands and the second Community Innovation Survey. A classification of technological regimes that refines Pavitt's taxonomy is applied to the data. Our analysis is aimed at identifying the variables that are best able to discriminate between technological regimes for our Dutch case. We find that a mix of innovation related and market structure related variables account for most variability and broad differences across regimes; dynamic market structure variables account for an additional share of variability and finer differences across regimes. Overall, we conclude that the concept of technological regimes provides a useful framework that helps to shed further light on the relationship between innovation and market structure.

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