Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/148980 
Year of Publication: 
2016
Series/Report no.: 
KOF Working Papers No. 413
Publisher: 
ETH Zurich, KOF Swiss Economic Institute, Zurich
Abstract: 
This paper investigates how the macroeconomic business cycle impacts the empirical relation between firms' innovations and their sales growth rates. Based on firm-level panel data over the time period 1995-2014, the paper finds no visible sales growth differentials between firms in booming economic environments. In the economically difficult times of recessions, by contrast, innovative firms show significantly higher sales growth rates than non-innovative firms. This finding is in line with Schumpeter's (1939) business cycle theory, where recessions play an important role in the adaptation of the economy towards innovative products and processes. Moreover, the paper shows that small innovative firms, profiting from their higher organizational flexibility and stronger entrepreneurial commitment, are the main beneficiaries in this adaption process.
Subjects: 
Innovation
Firm growth
Business cycle
Firm size
JEL: 
O33
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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