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Does Innovation Lead to Firm Growth? Explorative versus Exploitative Innovations

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  • Pontus Braunerhjelm
  • Per Thulin

Abstract

In this article, we examine the relationship between innovation and firm growth. Drawing on previous research, we implement a classification of innovations based on whether they are explorative or exploitative. Access to Swedish register data comprising the entire private sector from 1997 to 2012 allows us to construct innovation patterns for more than 480,000 firms. GMM-estimations confirm a significant and positive effect of both exploitative and explorative innovation on firms’ employment growth. More radical explorative innovations are shown to have a more persistent growth effect, while exploitative innovation increases labour demand in the short run.

Suggested Citation

  • Pontus Braunerhjelm & Per Thulin, 2023. "Does Innovation Lead to Firm Growth? Explorative versus Exploitative Innovations," Applied Economics Letters, Taylor & Francis Journals, vol. 30(9), pages 1179-1182, May.
    • Handle: RePEc:taf:apeclt:v:30:y:2023:i:9:p:1179-1182
    DOI: 10.1080/13504851.2022.2041166
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    Cited by:

    1. Qu, Yingge & Kumar, V. & Zhao, Yi, 2023. "A dynamic model of the contract length and early termination: The roles of technology evolution and pricing strategy," Journal of Business Research, Elsevier, vol. 167(C).

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