2006/18 LEM Working Paper Series

Innovation and Firm Growth in High-Tech Sectors:
A Quantile Regression Approach

Alex Coad, Rekha Rao
Innovation, Firm Growth, Quantile Regression, Innovation Policy

  JEL Classifications
O31, L25

We relate innovation to sales growth for incumbent firms in four high-tech sectors. A firm, on average, experiences only modest growth and may grow for a number of reasons that may or may not be related to "innovativeness". However, given that firms are heterogeneous and that growth rates distributions are heavy-tailed, it may be misleading to use regression techniques that focus on the "average firm". Using a quantile regression approach, we observe that innovativeness is of crucial importance for a handful of "superstar" fast-growth firms. We also discuss policy implications of our results.

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