Knowledge Accumulation as a Driver of Radical Innovations : Are There Firm Age Heterogeneities?

Recent evidence has given insights into the complementarities between radical and incremental innovations. This paper enriches the literature by disentangling how knowledge accumulation processes affect the development of future radical innovations and their prolongation over time. Using a multi-step methodology, we determine a firm’s persistence in R&D and incremental innovations using a dynamic random-effects model, and treat the outcomes obtained as a proxy of knowledge accumulation. Then, we estimate the effects on the intensity of radical innovations and their persistence. Our results show the existence of a minimum threshold for obtaining returns from R&D and incremental innovations, and we find this threshold to be inversely proportional to firm age. Hence, mature firms benefit more from knowledge accumulation than do young firms, and also more quickly. However, this result does not hold when considering non-persistent or non-innovative incumbents, as their volatile strategy provides lower expected returns from all innovation activities