Landmarks as lighthouses: firms' innovation and modes of exit during the business cycle

We revisit the relationship between innovation and survival, tracking how innovation types (product, process, organizational, and marketing innovation) relate to exit routes (closure, failure, M & A) during different phases of the business cycle (i.e. normal times, the 2007-08 financial crisis and subsequent recovery). In particular, we implemented a new (to the economic field) econometric approach, landmark analysis, to include time-varying covariates in survival models with competing exit routes on our representative sample of Dutch firms (obtained merging monthly register data with biennial innovation surveys, for 2006-2015). Our most straightforward result is that each type of innovation, across the different phases of the business cycle, affects, in a substantially different way, the likelihood to exit the market through different modes of exit. Innovations seems to grant some innovation premium, but no common pattern appears between the evolution of the relationships between different types of innovation and exit routes across the business cycle.