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Innovation and Training in New Firms

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  • Baldwin, John R.

Abstract

Recent studies have demonstrated the quantitative importance of entry, exit, growth and decline in the industrial population. It is this turnover that rewards innovative activity and contributes to productivity growth. While the size of the entry population is impressive - especially when cumulated over time - the importance of entry is ultimately due to its impact on innovation in the economy. Experimentation is important in a dynamic, market-based economy. A key part of the experimentation comes from entrants. New entrepreneurs constantly offer consumers new products both in terms of the basic good and the level of service that accompanies it. This experimentation is associated with significant costs since many entrants fail. Young firms are most at risk of failure; data drawn from a longitudinal file of Canadian entrants in both the goods and service sectors show that over half the new firms that fail do so in the first two years of life. Life is short for the majority of entrants. Only 1 in 5 new firms survive to their tenth birthday. Since so many entrants fall by the wayside, it is of inherent interest to understand the conditions that are associated with success, the conditions that allow the potential in new entrepreneurs to come to fruition. The success of an entrant is due to its choosing the correct combination of strategies and activities. To understand how these capabilities contribute to growth, it is necessary to study how the performance of entrants relates to differences in strategies and pursued activities. This paper describes the environment and the characteristics of entrants that manage to survive and grow. In doing so, it focuses on two issues. The first is the innovativeness of entrants and the extent to which their growth depends on their innovativeness. The second is to outline how the stress on worker skills, which is partially related to training, complements innovation and contributes to growth.

Suggested Citation

  • Baldwin, John R., 2000. "Innovation and Training in New Firms," Analytical Studies Branch Research Paper Series 2000123e, Statistics Canada, Analytical Studies Branch.
    • Handle: RePEc:stc:stcp3e:2000123e
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    File URL: https://www150.statcan.gc.ca/n1/en/catalogue/11F0019M2000123
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    References listed on IDEAS

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    1. Baldwin,John R. & Gorecki,Paul With contributions by-Name:Caves,Richard E. With contributions by-Name:Dunne,Tim With contributions by-Name:Haltiwanger,John, 1998. "The Dynamics of Industrial Competition," Cambridge Books, Cambridge University Press, number 9780521633574, January.
      • Baldwin,John R. & Gorecki,Paul With contributions by-Name:Caves,Richard E. With contributions by-Name:Dunne,Tim With contributions by-Name:Haltiwanger,John, 1995. "The Dynamics of Industrial Competition," Cambridge Books, Cambridge University Press, number 9780521465618, January.
    2. David B. Audretsch, 1995. "Innovation and Industry Evolution," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262011468, December.
    3. Timothy Dunne & Mark J. Roberts & Larry Samuelson, 1988. "Patterns of Firm Entry and Exit in U.S. Manufacturing Industries," RAND Journal of Economics, The RAND Corporation, vol. 19(4), pages 495-515, Winter.
    4. Samuel Hollander, 1965. "The Sources of Increased Efficiency: A Study of DuPont Rayon Plants," MIT Press Books, The MIT Press, edition 1, volume 1, number 026258235x, December.
    5. John Haltiwanger, 1997. "Measuring and analyzing aggregate fluctuations: the importance of building from microeconomic evidence," Review, Federal Reserve Bank of St. Louis, issue May, pages 55-78.
    6. Baldwin, John R. & Johnson, Joanne, 1996. "Business strategies in more- and less-innovative firms in Canada," Research Policy, Elsevier, vol. 25(5), pages 785-804, August.
    7. Gort, Michael & Klepper, Steven, 1982. "Time Paths in the Diffusion of Product Innovations," Economic Journal, Royal Economic Society, vol. 92(367), pages 630-653, September.
    8. Mayes,David G. (ed.), 1996. "Sources of Productivity Growth," Cambridge Books, Cambridge University Press, number 9780521554374, January.
    9. Baldwin, John R. Bian, Lin Dupuy, Richard Gellatly, Guy, 2000. "Failure Rates for New Canadian Firms: New Perspectives on Entry and Exit," Failure Rates for New Canadian Firms: New Perspectives on Entry and Exit, Statistics Canada, Economic Analysis Division, number stcb5e.
    10. Picot, Garnett & Dupuy, Richard & Baldwin, John R., 1994. "Have Small Firms Created a Disproportionate Share of New Jobs in Canada? A Reassessment of the Facts," Analytical Studies Branch Research Paper Series 1994071e, Statistics Canada, Analytical Studies Branch.
    11. Baldwin, John R., 1996. "Productivity Growth, Plant Turnover and Restructuring in the Canadian Manufacturing Sector," Analytical Studies Branch Research Paper Series 1995087e, Statistics Canada, Analytical Studies Branch.
    12. Baldwin, John R., 1998. "Failing Concerns: Business Bankruptcy in Canada," Failing Concerns: Business Bankruptcy in Canada, Statistics Canada, Economic Analysis Division, number stcb1e.
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    1. repec:dau:papers:123456789/6962 is not listed on IDEAS
    2. Sabourin, David Baldwin, John R. Smith, David, 2003. "Impact of Advanced Technology Use on Firm Performance in the Canadian Food Processing Sector," Economic Analysis (EA) Research Paper Series 2003012e, Statistics Canada, Analytical Studies Branch.
    3. Beckstead, Desmond Gellatly, Guy, 2004. "Are Knowledge Workers Found Only in High-technology Industries?," The Canadian Economy in Transition 2004005e, Statistics Canada, Economic Analysis Division.
    4. Sabourin, David & Baldwin, John R., 2001. "Impact of the Adoption of Advanced Information and Communication Technologies on Firm Performance in the Canadian Manufacturing Sector," Analytical Studies Branch Research Paper Series 2001174e, Statistics Canada, Analytical Studies Branch.
    5. Spyros Arvanitis & Tobias Stucki, 2008. "Training Propensity of Start-ups in Switzerland - A Study Based on Data for the Start-up Cohort 1996-97," Economics of Education Working Paper Series 0035, University of Zurich, Department of Business Administration (IBW).
    6. Baldwin, John R. & Yates, Janice, 1999. "Innovation, Training and Success," Analytical Studies Branch Research Paper Series 1999137e, Statistics Canada, Analytical Studies Branch.
    7. Yanick Labrie & Claude Montmarquette, 2005. "La formation qualifiante et transférable en milieu de travail," CIRANO Project Reports 2005rp-04, CIRANO.
    8. Sabourin, David & Baldwin, John R. & Hanel, Peter, 2000. "Determinants of Innovative Activity in Canadian Manufacturing Firms: The Role of Intellectual Property Rights," Analytical Studies Branch Research Paper Series 2000122e, Statistics Canada, Analytical Studies Branch.

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