Firm innovation persistence: a fresh look at the frameworks of analysis

Abstract

This paper introduces the special issue on innovation persistence. It delineates three complementary theoretical frameworks assessing drivers and implications of innovation persistence: ‘knowledge accumulation’ approach, the ‘success-breeds-success’ hypothesis and the concept of sunk costs in R&D activities. It emphasizes how path dependence could be related to innovation persistence. It provides an extensive overview of the main empirical findings of recent papers and suggests a new research agenda about firms’ dynamic capabilities and innovation persistence. Finally it highlights a set of issues that deserve further investigation in the future. The contributions to this issue are set out as well.

Keywords:

• innovation persistence
• knowledge accumulation
• sunk costs
• dynamic capabilities

Notes

1. The dynamic increasing returns hypothesis seems to play a major role only for small firms (Duguet and Monjon 2004). The impact of learning is captured by the specific role of previous innovation behavior that is different from the effect of current R&D on current innovation. Cabagnols (2006) performs an empirical analysis with a similar approach. Focusing on the technological knowledge feedback and on its impact on the ability of French and UK firms to persist in innovation, he notes that, in the two countries, firms having different rates of technological learning tend to persist unequally in their innovation activities.

2. Among these systematic innovators, there are probably many ‘first movers’ that achieve dynamic learning and produce persistent high levels of profits (see Mueller 1997).

3. Nevertheless, Raymond et al. (2010) underline that many studies on the relationship between innovation and firm performance are of cross-section type. As a consequence, they stress that these studies cannot properly analyze the dynamics of innovation and firm profitability.

4. Note that the ‘replacement effect’ approach considered previously does not take into account the sunk cost in R&D activity. By contrast in the frame of patent race due to the obliged temporal continuity of the R&D process, the winner of the first race is challenged by the followers wanting to continue the race in order to pay back the cost of R&D financial efforts (Gallini 1992). Woerter (2011, 2014) explores the impact of competition on FIP. This frame explains why a firm persists to invest in R&D.

5. Note that the macroeconomic context has deeply changed with the globalization. Now industrial relocation sets up one alternative profitable solution to high wage costs.

6. As stated by Teece “… business enterprise is shaped but not trapped by its past” (2007, 1341).

7. The canonical model is experienced by Clausen et al. (2013), Duflos (2006), Haned (2011), Peters (2009), Raymond et al. (2010).

8. ‘Enterprises with strong dynamic capabilities are intensively entrepreneurial’ (Teece 2007) such firms adapt to business ecosystem and shape them. It means we necessarily have to work on the relationship between internal and external factors.