Does R&D investment increase SME survival during a recession?

• Published in: Technological forecasting & social change Vol. 137; pp. 190 - 198
• Main Authors: Jung, Hyejin, Hwang, JungTae, Kim, Byung-Keun
• Format: Journal Article
• Language: English
• Published: New York Elsevier Inc 01.12.2018; Elsevier Science Ltd
• Subjects: Capital investments; Economic recession; Innovative firm; Investment; R&D; R&D investment; Recessions; Research & development; Small & medium sized enterprises-SME; Studies; Survival; South Korea; Innovative firm; R&D investment; Survival; Economic recession
• ISSN: 0040-1625; 1873-5509
• DOI: 10.1016/j.techfore.2018.07.042

Using data from 588 Korean small and medium-sized enterprises (SMEs) for 2008–2014, this study investigates whether R&D investment can affect the probability of a firm's survival during a recession period. We find that the effect of R&D investment is not identical in all firms. R&D investment is shown to be a poor choice for general firms to survive; however, it is an effective strategy for firms that are innovative and capable of producing intellectual properties during recessionary periods. We also find firm size and industry growth can lower the probability of exit. •The effect of R&D investment during a recession is subject to the firms' innovativeness and investment in R&D.•The level of a firm's innovativeness is important for determining the impact of R&D investment.•R&D investment without proper capability and without appropriate results is toxic to small firms.•Firm size and industry growth can lower the probability of exit.•Age, export, productivity, and industry concentration appear to be insignificant factors for firm survival