Innovate or die: Corporate innovation and bankruptcy forecasts |
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| Institution: | 1. Department of Computer Science, Systems and Communication, University of Milan-Bicocca, viale Sarca 336/14, 20126 Milan, Italy;2. Department of Business Administration, Finance, Management and Law, University of Milan-Bicocca, via Bicocca degli Arcimboldi 8, 20126, Milan, Italy;1. NIDA Business School, National Institute of Development Administration (NIDA) & The Securities and Exchange Commission of Thailand, Bangkok, Thailand;2. Center of Excellence in Management Research for Corporate Governance and Behavioral Finance, SASIN School of Management, Chulalongkorn University;3. Great Valley School of Graduate Professional Studies, Pennsylvania State University, Mavlern, PA, USA |
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| Abstract: | We investigate the relationship between a firm’s innovation performance and its probability of bankruptcy. Estimating the discrete hazard model with a comprehensive set of bankruptcies spanning the period of 1980–2009, we find several previously neglected innovation-based variables are important determinants of bankruptcy probability, especially for firms belonging to technology-intensive industries. R&D productivity demonstrates persistent significance across different prediction horizons while the predictive power of patent count becomes larger and more significant at longer prediction horizons. We also find that a firm’s organization capital intensity correlates positively with future bankruptcy. |
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| Keywords: | Corporate bankruptcy Discrete hazard model Innovation Patent |
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