Innovation and firm survival: the role of timing, funding, and networks

• Main Author: Gao, Ming
• Other Authors: Wang Jue
• Format: Thesis-Doctor of Philosophy
• Language: English
• Published: Nanyang Technological University 2024
• Subjects: Social Sciences; Innovation; Survival; Small- and medium-sized enterprises (SMEs)
• Online Access: https://hdl.handle.net/10356/173718
• Institution: Nanyang Technological University

As small- and medium-sized enterprises (SMEs) are often considered one of the crucial drivers of economic growth, innovation as a vital factor affecting SMEs’ success has attracted great attention in the academic community in the last few decades. It not only helps incumbents shore up their position but also enables new entrants to get access to the current market. However, innovation sometimes harnesses firms due to its inherent risk. There is a large body of literature that provides empirical evidence for the debate regarding the positive and negative links between firms’ innovation and survival. While many studies have discussed how innovation influences firms’ survival, little has been done to explore how this relationship is shaped by other factors. Therefore, researchers realized that attention should be turned to exploring heterogeneous issues or the factors that may affect the influence of innovation on firms’ survival. Among the factors, it was found that the timing of innovation is an important contributor to firms’ survival. Thus, the first research question that will be addressed is: does the timing of innovation influence SMEs’ subsequent survival? The grounding theories of organizations and organizational ecology, as well as insights from the liabilities of newness and smallness, are used to explain the influence of the timing of innovation on SMEs’ survival. The results suggest that there is a negative relationship between SMEs’ innovation in the early stage and their survival. This finding reveals that premature innovation is accompanied by the risk of exit. By contrast, engaging in innovation at a later stage when firms are more stabilized would be more beneficial to firm survival. Given the explanation that a lack of adequate financial resources may increase the overall risk profile faced by SMEs and thereby reduce their likelihood of survival, this study tries to explore whether a helping hand from other organizations such as governments and large incumbent firms can help to diminish the negative influence of SMEs’ innovation in the early stage on their survival. This brings forth our second research question: does external financial support have a moderating effect on the relationship between firms’ innovation and their survival performance? This study explores how firms’ innovation-survival relationship is moderated by the financial resources they receive from external sources. The resource-based view (RBV) theory and organizational ecology theory are used to argue for such moderation effects. Moreover, as previous studies have shown that the rationales for public and private external financial support to firms are different, this study has a further unanswered research question to distinguish the moderating impact of the two external financial sources: government funding and venture capital investment. Overall, our findings reveal that the moderating influence of external financial support on firms’ innovation-survival relationship depends on the sources of financial support and types of innovation. In addition to the external financial support, this study also unfolds the moderating effects of collaborative networks. This leads to the next research question: do collaborative networks moderate the relationship between SMEs’ innovation activities and their survival? This study mainly employs knowledge-based view (KBV) theory combined with Transaction Cost Economics (TCE) theory to argue for the moderating roles of firms’ collaborative networks. Moreover, as the partners of a collaborative network can either be from the public or private sectors, this study differentiates the moderating influence of interfirm collaborations and university-industry (U-I) collaborations to further explore whether there is any difference between the networks support in the public and private sectors. Overall, particularly noteworthy is the finding that the moderating influence of collaborative networks on firm innovation-survival relationship mainly depends on the types of innovation activities. This study draws on a sample of 229 SMEs in the high-tech nanotechnology industry, which provides a suitable context for our empirical investigation. Moreover, the Accelerated Failure Time (AFT) models and the Cox Proportional Hazards (PH) models are used to investigate the above-mentioned three research questions. This study closely examines the influence of the timing of innovation, the heterogeneous effects of receiving government funding and venture capital investment, and the heterogeneous effects of collaborating with other incumbent firms and universities. This not only sheds new light on how SMEs innovation-survival relationship is shaped by the timing of initiating innovation but also how this relationship is moderated by external financial support and collaborative networks from different sources, including the public and private sectors. Our findings will not only enlighten the policymakers in drafting different supportive schemes to provide aid to the SMEs but also the entrepreneurs in establishing routines for managing their innovation activities and taking full advantage of external financial support and collaborative networks to improve their innovation and business performance.