Technological activity and survival of firms

The paper presents new evidence on the effect of technological activity on the post-entry performance of firms. By comparing firm survival across technical and non-technical products and over stages of differing technological activity, it attempts to resolve two seemingly contradictory hypotheses: that uncertainty inherent in high technological activity reduces the probability of survival and that technological activity increases the probability of entrant survival. The empirical results, in the context of the product life-cycle framework, show that entering firms enjoy a higher probability of survival in stages of high technological activity, and in products that are more technical in nature. However, the hazard function — the probability of failure conditional on age — is higher for technical products, reflecting the adverse effects of technical uncertainty and obsolescence of incumbent knowledge.