Marco Cucculelli, Barbara Ermini

New Product Introduction and Firm Growth

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Keywords: New Product Introduction, Product Tenure, Innovation, Governance, Firm Growth

This paper investigates the effect of product introduction, as a proxy for firm innovative activity, on firm growth in a sample of 186 Italian manufacturing companies over the period 2000-2006. We explore the role played by the tenure of the last product introduced in a product portfolio (i.e. the number of years since its first introduction) as an additional variable into the standard explanatory scheme of firm growth. We also analyze how firm-specific entrepreneurial and managerial characteristics affect firm growth through the new product introduction process. Our estimates confirm the importance of a product specific effect, i.e. product age, in a firm growth setting and help in explaining why many previous studies have failed to find a statistically robust relationship between product innovation and firm growth. Additionally, the empirical evidence also shows that the relationship between product innovation and firm growth is more pronounced when the governance structure of the company is more oriented to identify and exploit new market opportunities.

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