Innovation And Firm Growth In High-Tech Sectors: A Quantile Regression Approach

The authors relate innovation to sales growth for incumbent firms in high-tech sectors. A firm, on average, experiences only modest growth and may grow for a number of reasons that may or may not be related to 'Innovativeness'. However, given that the returns to innovation are highly skewed and that growth rates distributions are heavy-tailed, it may be misleading to use regression techniques that focus on the 'Average effect for the average firm'. Using a quantile regression approach, they observe that innovation is of crucial importance for a handful of 'Superstar' fast-growth firms. They also discuss policy implications of their results.