Survival of Innovative Entrants in Knowledge Based Sectors

The aim of this chapter is to explore how the survival likelihood of innovative entrants in highly dynamic and knowledge intensive industries is affected by the characteristics of such firms at the time of their founding. Our methodology to identify such companies has been based on information contained in patent data for two technological fields, i.e. lasers and data switching networks. The main result of our analysis is that the importance of the firm’s innovation at entry, as measured by the number of citations it receives within three years from the priority date, positively affects the firm’s survival. We claim that this variable could proxy for the founder’s previous market related experience and hence the firm’s ability to exploit knowledge about market opportunities and customer needs.