research

ELSEVIER Research Policy 26 (1997) 33-48

policy

How persistently do firms innovate?

P.A. Geroski a, j. Van Reenen b,c, C.F. Walters ~

a Department of Economics, London Business School, Sussex Place, Regents Park, London, NWI 4SA, UK
b Department of Economics, University College London, Gower Street, London, WC1E 6BT, UK
c Institute for Fiscal Studies, 7 Ridgemount Street, London. WC1E 7AE, UK

Received 28 September 1996

Abstract

This paper examines the innovative history of a number of UK firms using two large databases, looking for evidence
consistent with the view that firms that innovate typically do so persistently. The first sample contains 3304 firms which
registered at least one patent in the US at any time in the period 1969-1988, while the second consists of 1624 firms which
produced at least one major innovation at any time in the UK from 1945to 1982. Both data sets yield the same conclusion,
namely that very few innovative firms are persistently innovative. © 1997 Elsevier Science B.V. All rights reserved.

I. Introduction 20-year period 1969-1988, while the second is the

Most studies of the determinants of corporate
innovative activity focus on the question of how
many technologically important innovations are pro-
duced by a particular firm over a certain time inter-
val. Since the simple fact is that many finns do not
innovate (in this sense) at all, studies of this type
often effectively end up concentrating on the ques-
tion: what makes a firm innovative? However, if
firms that actually do innovate fail to do so persis-
tently, it becomes interesting and important to focus
on a second question, namely: what keeps a firm
innovative over time? In this paper, we examine the
innovative record of a large number of UK firms
over relatively long periods of time using two partic-
ular measures of 'innovative activity'. The first is
patenting activity by UK firms in the US over the
production of major innovations by UK firms over
the 38-year period 1945-1982. Both sets of data tell
the same story, namely that only a very small num-
ber of firms produce patents or major innovations on
a regular basis.
We start in Section 2 by setting out the measure-
ment issues which arise when one tries to examine
patterns of innovation over time for particular firms.
Then, taking the length of time over which firms
regularly innovate as the basic unit of analysis, we
concentrate on examining the hypothesis that the
production of innovations is subject to 'dynamic
economies of scale'; that is, that the more innova-
tions a firm produces, the more likely it is to con-
tinue to innovate. In Section 3, we analyse the data
on innovation and patenting spells, and show that it
is hard to reconcile what we observe with the hy-

0048-7333/97/$17.00 Copyright © 1997 Elsevier Science B.V. All rights reserved.

Pll S0048-7333(96)00903- 1
34 P.A. Geroski et a l . / Research Policy 26 (1997) 33-48
pothesis that 'dynamic economies of scale' are an
important driver of innovation processes (at least for
the types of innovations that we consider here). We
conclude in Section 4 with some speculative obser-
vations on what these results might mean for models
of technological competition, theories about firms'
'dynamic capabilities' and endogenous growth the-
ory.
2. Modelling persistent innovative activity
Examining how regularly innovations occur raises
a number of interesting issues of experimental design
and interpretation. In this section, we explore three
of the more important of these, namely: measure-
ment issues (i.e. the definition of 'innovation' and
problems associated with the frequency of observa-
tion), hypotheses about the determinants of persistent
innovative activity, and the statistical modelling of
innovation spells.
2.1. The measurement of innovation
There are many possible ways to measure an
'innovation'. At one end of the spectrum are mea-
sures like R & D spend (an input measure) and counts
of minor technical or organizational innovations, all
of which are likely to occur on a routine basis. One
is likely to observe that many firms are persistent
innovators using these criteria. At the other end of
the spectrum are major new product or process
breakthroughs (or major innovations in organiza-
tional design) which open up new markets or funda-
mentally transform a firm's value chain. These are
'innovations' that almost certainly occur on a highly
irregular basis, and it would be surprising if any
firms persistently innovated in this sense on a year
in, year out basis.
Our data consist of records on the patenting be-
havior of 3304 UK firms over the period 1969-1988,
and the production of 'major' innovations by 1332
firms over the period 1945-1982. The patents data
record 'innovations' that are new and technologi-
cally important enough to be granted a patent, while
the 'major innovations' data record technically inno-
vative and commercially successful new products
a n d / o r processes introduced by particular finns. 1
As measures of 'innovation', these data are limited
in their focus on the generation a n d / o r use of new
technology. This limitation aside, however, there is
much to be said for them. They record events that
can have a significant effect on a firm's market
position, and are, therefore, likely to be important
determinants of its long run competitiveness. 2 Fur-
ther, 'innovations' defined in this way are neither
routine nor earth shattering, and are, therefore, possi-
bly as likely to occur persistently as not. They have
also been extensively used as performance indicators
by scholars interested in the question 'what makes a
firm innovative?', and that makes it much easier to
compare work on persistence with previous studies
of what makes firms innovative.
One further measurement issue is worth noting.
Our data are recorded annually, and this means that
an 'innovation spell' will be measured as the number
of successive years in which a firm produces a patent
(or a major innovation). This may exaggerate the
episodic nature of innovative activity. What seems
like a desultory pattern of innovation which produces
a patent every three to five years (say) may actually
be a rather rapid exploitation of a difficult and
obtuse new technology. More generally, if firms
typically undertake single innovation projects that
last substantially longer than a year, then a continu-
ous stream of innovative activity may produce a very
irregular pattern of innovations. However, many
firms undertake a portfolio of such projects and
many undertake projects of only modest length. They
should, therefore, produce a more continuous stream
of innovations. Further, multiple spells of innovation
that follow one another closely in time can be aggre-
gated into a single spell (our conclusions are robust
See Patel and Pavitt (1995) for an overview discussion of the
measurement of technological activity, Griliches (1990) on patents
in particular, Townsend et al. (1981) and Geroski (1994) on the
'major innovations' data used here, and (by contrast) Acs and
Audretsch (1990) for work on data that include many minor
innovations.
2 For work linking these measures of innovation to corporate
performance, see Geroski et al. (1993, 1995), and references cited
therein.
 P.A. Geroski et al. / Research Policy 26 (1997) 33-48
to this redefinition of spells). Thus, although it is
possible that any conclusion about how frequently
firms innovate may be an artefact of how the data
are collected, it is not obviously the case that using
annual data will make a regular stream of innova-
tions produced over time look particularly episodic
and irregular. 3
2.2. Hypotheses
There are many factors that may help to deter-
mine how long an innovation spell will last. These
include technological opportunity, market demand,
appropriability regimes, internal corporate capabili-
ties, competitive market pressures and so on. All of
these factors are exogenous to the events surround-
ing any particular spell, and they generate predic-
tions that spells will either be long (if conditions are
favourable) or short (if they are not). In most cases,
they reflect forces that are difficult to measure, and
this makes them difficult to test.
The hypothesis that the production of innovations
is subject to 'dynamic economies of scale' (or, more
colloquially, that 'success breeds success') is of a
rather different nature. If the volume of innovations
produced by a firm up to date t has an effect on the
probability that yet another innovation will be pro-
duced at t, then spell length depends (inter alia) on
what happens just prior to a n d / o r during the spell;
i.e. it is endogenously determined. This may occur if
there is positive feedback between the accumulation
of knowledge and the production of innovations by a
firm (and, if spillovers are important, by its rivals),
or if there are scale economies or learning by doing
3 This measurement problem is made worse by the fact that the
annual window for enumeration of patents by the United States
Patents and Trademarks Office may not reflect the periodicity of
firms' decisions to patent. Two other drawbacks of the data are
that we neglect spells of patenting which occur within a year, and
that our measurement of spell length is not robust to random
misallocations of patenting or innovation dates for low frequency
innovators. The procedure of 'filling in' one-year gaps should
make our results reasonably robust to the second problem, but
neglecting spells of length less than a year may lead us to
understate dynamic scale economies.
35
effects in the process of innovation production. 4 If
such dynamic economies of scale in innovation exist,
we expect (in principle) to see both short innovation
spells (those that have ended before the effects of
dynamic economies are felt) and some long spells
(those sustained by dynamic economies) experienced
by the same firm in the same set of circumstances.
There are at least two ways to make inferences
about dynamic scale economies from observations
on the length of innovation spells. The first proce-
dure is to look for a relationship between the number
of innovations produced by a firm just prior to an
innovation spell and the length of the spell that
follows, expressing that relationship in terms of a
'threshold' level of pre-spell innovative activity nec-
essary to generate a spell of length T with some
probability. This measure has the great virtue of
generating a natural and easy to interpret number to
measure dynamic scale economies (the threshold),
but it captures only those scale effects that are
associated with events that occur immediately prior
to the spell. A second procedure is to measure the
relationship between the length of time a firm spends
in a spell, and the probability that the spell will end
at some time t. Since at least one innovation is
produced per year during a spell, this effectively
measures the relationship between cumulative
within-spell innovation output and the likelihood that
the spell will continue (a relationship which looks
something like an innovation learning curve). 'Nega-
tive duration dependence', in which the probability
that the spell will end falls the longer it goes on,
4 There are many possible sources of increasing returns in the
production of innovation, including the public good nature of
knowledge, any kind of benefits brought on by a more elaborate
scientific division of labour and set up costs. Certainly the public
good nature of knowledge means that it is likely to display
increasing returns in use (see Wilson, 1975), an observation which
is sometimes used to suggest that the production of innovations
may display economies of scope (see Nelson, 1959, and many
others). In addition, if R&D enriches a firm's 'absorptive capac-
ity', enabling it to learn more efficiently and benefit from
spillovers, then it is possible that at least some part of the
relationship between R&D input and innovative output will dis-
play increasing returns (e.g. see Cohen and Levinthal, 1989, and
others). For work suggesting that geography can help to create
increasing returns in innovation, see Feldman (1994), Porter
(1990), Krugman (1991) and others.
36 P.A. Geroski et al. / Research Policy 26 (1997) 33-48
captures dynamic effects generated within the spell,
but is not so easily measured in a simple summary
statistic.
2.3. The statistical methodology
The statistical procedure one needs to follow to
measure thresholds of initial innovation or the degree
of duration dependence is fairly well known. We
take the spell of time in which a firm innovates as
our unit of analysis, and model the probability that
the spell will end at any particular time; i.e. the
hazard rate. 5 For any probability distribution func-
tion F ( t ) = P r ( T < t), there exists a corresponding
density function f ( t ) = O F ( t ) / O t , and a survivor
function S(t) = 1 - F(t) = P r ( T > t). Now, con-
sider the probability h(t) of a patenting or innova-
tion spell ending in the short period A from t given
it has lasted until t: h(t) = Pr(t < t + AIT> t). The
limit of this probability as A tends to zero is the
hazard rate,
Pr( t < t + AIT> t)
A(t) = lim (1)
a~o A '
and substituting for our probability distribution, den-
sity and survivor functions,
F(t + A) - F(t) or(t)/Ot
A(t) = lim = a regression intercept included (which admits an
a-~o AS(t) S(t)
f(t)
- S(t)" (2)
It is the determinants of A(t) that are of interest here,
5 Two arguments favour the use of this type of formulation.
Firstly, there is no natural unit of time in which firms make
decisions to innovate, so it is analytically convenient to model the
firm's decisions in continuous time. Secondly, even if there were
a natural time ordering of inventive decisions, we cannot suppose
that this ordering corresponds to the annual observations in our
data, or that this time ordering is synchronized across firms. These
two caveats are sometimes grouped together under the pseudonym
length biased sampling. Inference about the underlying stochastic
inventive process based on discrete sampled data may therefore be
incorrect when conventional discrete choice distributions are used
(probit, logit and so forth). The functional form of these distribu-
tions is sensitive to the time interval used in their formulation,
whereas continuous time models are invariant. See Kiefer (1988)
Lancaster (1990) and Kalbfleisch and Prentice (1980) for useful
discussions of these models.
and, in particular, how A(t) varies with the initial
level of innovation (which identifies the threshold),
and how it varies over time (negative duration de-
pendence occurs when A'(t) < 0). 6
Since we are interested in the relationship be-
tween the initial level of innovative activity and the
length of the subsequent innovating spell, one way
forward is to use a proportional hazards model,
where A ( t ) = A0(t)~b(X/3), A0(t) is the baseline
hazard, X is a vector of explanatory variables and /3
a vector of parameters in some general function ~b
(see Cox, 1972). There are, however, two problems
with this method. First, inappropriate choice of the
distribution of A0(t) can produce biased and incon-
sistent parametric estimates (see Heckman and
Singer, 1984). This problem can, however, be
avoided since /3 can be estimated without assuming
a distribution for the baseline hazard by definition of
the partial likelihood function. A non-parametric ap-
proach can then be used to obtain A0(t). However,
correct specification of the baseline hazard brings a
gain in efficiency, and enables one to say something
about the direction of duration dependence which
semi-parametric estimation does not. Second, propor-
tional hazards coefficients are hard to interpret, being
measured relative to this baseline hazard. Variables
can be measured as deviations from their means and
interpretation for the /3 relative to the mean spell),
but we believe the concept of the mean spell in our
skewed data to be of little use.
There are two forms of reparameterisation avail-
able which would enable us to give our regression
coefficients the standard classic linear regression
model interpretation (that is, as affecting the mean of
the dependent variable with an additive error). First,
one can restrict the distribution of the additive error
and allow a general transformation of the dependent
variable, or second, one can restrict the transforma-
tion of the duration data and allow a general additive
error distribution. This latter procedure is known as
6 These models are often used in the literature on unemploy-
ment where duration dependence (i.e. how A(t) varies as the
length of a spell of unemployment increases, all other things held
constant) is the main focus of interest; see Lancaster (1990) for a
survey.
 P.A. Geroski et al. / Research Policy 26 (1997) 33-48
the accelerated failure time model. Only the Weibull
class of hazard functions is linear in both restricted
and general transformations of the dependent vari-
able. Since economic theory does not have much to
say about the distribution of the baseline hazard, the
Weibull distribution where A(t) = ~/c~t"-1 is a natu-
ral starting point. 7 To implement the model, the
dependent variable is transformed to the natural log
of the time until failure of a spell and the coefficients
are estimates of the expected (log of) time until
failure scaled by the duration dependence; that is,
E[tIX] = e x p ( a / l ' X ) . It is worth noting that omit-
ting relevant determinants of duration (i.e. particular
X variables) biases the results towards observing
negative duration dependence. Hence our data will
only be informative on within-spell dynamic effects
if we are using a complete model (which we cannot
do) or if we observe positive duration dependence
(in which case we can be sure that within-spell
dynamic effects do not work to prolong spells).
3. Analysing innovative spells
To explore the conditions under which innovative
activity becomes persistent over time, we use two
different measures of innovation: patenting and the
production of major innovations. In this section, we
start by examining the size of thresholds, first on
patenting and then on major innovations. We then
proceed to analyse the determinants of hazard rates,
focusing on the degree of duration dependence.
3.1. The persistence of patenting
The patents data consist of a balanced panel of
3304 UK firms, both quoted and private, observed
over the period 1969 to 1988. These 3304 firms were
selected from the population of over 7500 UK firms
which were granted patents by the United States
Patents and Trademarks Office at some time in the
7 A special case of the Weibull distribution is the exponential
distribution, obtained when ot = 1 (memoryless, constant hazard),
but this is a one-parameter distribution and is unlikely to accu-
rately describe data that display both short and long spells of
patenting and innovative activity. The Weibull distribution dis-
plays a hazard monotonically increasing or decreasing in duration
via a. Positive duration dependence is implied by ot > 1.
37
period. The basic problem of sample design which
arises in studies of persistent behaviour is to ensure
that the unit under observation is the same over time.
In the UK, waves of merger and divestiture make it
difficult to create a satisfactory history for many
businesses. Further, an examination of the raw data
convinced us that a number of supposedly UK-reg-
istered firms had titles associated with countries of
registration other than the UK. Thus, we decided that
to qualify for entry into our sample, a firm's owner-
ship status had to be positively known. That is,
unless the finn was found to be a UK parent, sub-
sidiary or associate in any year in which it was
granted a patent, it was excluded from the data. 8
Two features of patenting activity stand out par-
ticularly clearly in the data. First, most firms never
patent: a population of 7500 patenting firms is a very
small fraction of the total population of UK firms
operating over the period (even assuming that all of
them are UK firms). Second, most firms that patent
only ever patent once, and relatively few firms pro-
duce even as much as one patent per year on aver-
age. The frequency distribution of the total number
of patents produced over the period 1969-1988 for
our 3304 firms contains a huge spike at one patent, a
much smaller spike at two patents, small and roughly
equal proportions continuously between half a dozen
and two hundred patents and a few sparsely dis-
tributed outliers with many hundreds of patents. The
distribution of total patents per firm has a mean of
10.083, a median of two patents, and a standard
deviation of 79.979. The distribution is highly skewed
(32.814 centred on zero) and the tails are thick
(kurtosis = 1359.25). Likewise, the distribution of
the average number of patents per firm has a mean
of 0.504, a median of 0.1, and a standard deviation
3.999 (the skewness and kurtosis of the two distribu-
tions are about the same). 9
8 Dun and Bradstreet's Who Owns Whom was used for this
purpose. We are aware that the timing of the ownership status
given in Who Owns Whom and the date of receipt of a patent may
not be exactly contemporaneous, but there is little that we can do
about this problem. Of the sample of 3304 finns 78% were
subsidiaries, 17% were parents, 4% were associates and the rest
were of mixed classification.
9 Much the same high skew and low average patenting fre-
quency is evident in the population of 7500 firms which patented
at least once over the period.
38 P.A. Geroski et al. / Research Polic~' 26 (1997) 33-48
Our interest is not in the number of patents pro-
duced by any particular firm, but in the frequency
and consistency with which particular firms patent.
For this reason, we focus on patenting spells, defined
as the number of successive years in which a firm
produces at least one patent per year. Our 3304 finns
have 5178 spells between them (some firms have
multiple spells). 10 Frequencies of spells of lengths
between 1 and 20 years are given in Table 1, which
shows rather clearly that the lengths of these spells
are distributed in much the same way as the total
number of patents. As it is hard to conceptualise
what the distribution of these spells looks like on a
per firm basis, Table 1 also presents spell frequen-
cies of lengths l to 20 for the maximum length
patenting spell per finn. The most interesting feature
of the table is that although there are considerably
more spells than finns, much of the difference be-
tween the number of firms and the number of spells
is accounted for by spell lengths of 1 and 2 years'
duration, meaning that most finns with multiple
spells have two (or, occasionally, more) spells of
very short length. For spell lengths between 3 and 8
years, the total number of spells is nearly equal to
the number of firms having maximum duration spells
of that length. H With this in mind, an inspection of
to Since we are dealing with reported spells of innovative activ-
ity over a set time period, left and right censoring may distort the
observed distribution of spell lengths. The corrected mean spell
length over all 5178 spells (4849 of which are not right censored)
is 1.921 years, and the corrected median spell length is 1 year. For
the 4574 spells that are not left censored (4267 of which are also
not right censored), the mean spell length is 1.675 years and the
median is 1 year. For the remaining 604 spells that are left
censored (582 of which are not right censored), the mean spell
length is 3.725 years and the median is 1 year. The uncorrected
mean spell length over all 5178 spells is 1.799 years, with a
median of 1 year.
11 There are two other features of Table 1 worth noting. Firstly,
the number of all spells of 9 years or more is equal to the number
of maximum length spells of the same duration. Clearly these
numbers must coincide for 10 years or more (no finn could have
more than one spell of 10 years' duration), but actually coincide 1
year's duration earlier. Secondly, within these coincident lengths,
there exist small frequency spikes at 14 and 16 years' duration
and a larger spike at 20 years. Moreover, for both measures the
frequencies of lengths of 10 years and up do not fall away as
quickly or smoothly as might have been expected.
our data reveals three regimes of patenting behaviour
(Appendix A provides a detailed description of the
data):
1. single patentors: these are firms which produce a
few patents in one short spell (the vast majority
patent only once in one year). This group com-
prises about 64% of the sample, and produced
6765 patents over the period (3.21 per firm);
2. sporadic patentors: these are firms which produce
a handful of patents and do so in a small number
of short spells. This group comprises about 34%
of the sample, and produced 10020 patents over
the period (9.58 per firm);
3. heavy patentors: these are finns which produce a
large number of patents (dozens or even hun-
dreds) and who, for the most part, patent heavily
in every year for which we have data. This group
comprises about 2% of the sample, and produced
16 528 patents over the period (284.97 per firm).
Our interest is in relating the length of patent
spells to the initial level of patenting. Table 2 shows
empirical survival rates (i.e. the percentage of spells
that lasts at least as long as T years) and associated
standard errors for spells starting with 1, 2, 3, 4 and
5 or more patents computed using the Kaplan and
Meier (1958) estimator. 12 Since only a small num-
ber of spells (less than 4%) last for more than 5
years, 5-year intervals are used beyond survival times
of this length. J3 Roughly speaking, only 30% of all
patenting spells are ongoing after one year. After 4
years the percentage of spells ongoing drops to
around 7%, after 10 years it drops to 3% and some-
12 A total of 98.5% of all spells begin with between 1 and 5
patents: 78% with 1 patent, 14% with 2 patents, 4% with 3
patents, 2% with 4 patents, 0.5% with 5 patents. The remaining
1.5% begin with between 6 and 219 patents.
13 We also estimated these survival models for spells that were
left censored. Although an inability to control for left-censoring in
spells leads to a positive bias in survival rates for each start-up
patent class, the effect on survival rates for all spells is modest
(but increasing with the number of start-up patents). In fact, log
rank and likelihood ratio tests of the homogeneity of each left-
censored and uncensored subsample by start-up patent class imply
that only left-censored and uncensored spells with four patents in
their first year are statistically the same.
 P.A. Geroski et al. / Research Policy 26 (1997) 33-48 39

Table 1
Distribution of patenting and innovation spell lengths and maximum spell lengths by business unit
Length (years) All spells Maximum spells
Patents Major innovations Patents Major innovations
No. % No. % No. % No. %
1 3721 71.86 2632 87.24 2147 64.98 1355 83.44
2 730 14.10 277 9.18 520 15.74 182 11.21
3 299 5.77 68 2.25 240 7.26 52 3.20
4 135 2.61 23 0.76 120 3.63 19 1.17
5 88 1.70 6 0.20 81 2.45 5 0.31
6 39 0.75 6 0.20 34 1.03 6 0.37
7 34 0.66 2 0.07 31 0.94 2 0.12
8 12 0.23 1 0.03 11 0.33 1 0.06
9 16 0.31 0 0 16 0.48 0 (1
10 11 0.21 1 0.03 11 0.33 1 0.06
I1 20 0.39 1 0.03 20 0.61 I 0.06
12 5 0.10 5 0.15
13 6 0.12 6 0.18
14 10 0.19 10 0.30
15 4 0.08 4 0.12
16 11 0.21 11 0.33
17 8 0.15 8 0.24
18 6 0.12 6 0.18
19 1 0.02 1 0.03
20 22 0.42 22 0.67

Total 5178 100 3017 100 3304 100 1624 100

what less than 1% o f all spells last 20 years or more.
S u r v i v a l rates for spells with 1 patent in their first
year are about 23%, for those with 2 patents 4 5 % ,
for those with 3 patents 63%, for those with 4
patents 72% and those that start with 5 or more
patents enjoy a survival rate o f 89% after 1 year.
Spells that start with 5 or m o r e patents h a v e an 82%
chance of surviving for a third year g i v e n that they
have lasted as long as 2 years, a 74% chance of
s u r v i v i n g a fourth year g i v e n that they h a v e survived
3 years and an 18% chance of surviving m o r e than
15 years g i v e n that they h a v e lasted as long as 15
years.
Table 2 suggests that the threshold level o f patents
likely to induce a patenting spell o f 3 or m o r e years
is probably around 5 patents. G i v e n an initial produc-
tion of 5 o r m o r e patents, the e x p e c t e d length o f the
subsequent patenting spell is 8 years. F i n n s that
initially produce 4, 3 and 2 patents can e x p e c t to
enjoy spells o f 3, 2 and 1 year(s) respectively. Firms
with a single patent are unlikely to patent again. 14 A
f i n n that produces 4 patents in year t has only a 37%
chance o f e n j o y i n g a spell of no less than 3 years,
while one that produces 5 or m o r e patents has a 74%
chance. Indeed, a firm that produces 5 or more
patents has roughly twice the probability of e n j o y i n g
a patenting spell o f any length greater than 3 years
than a firm that produces only 4 patents, and, in the
main, m u c h m o r e than three times the chance of
e n j o y i n g a patenting spell of any length than a firm
that produces 3 or f e w e r patents. This is consistent
with the v i e w that s o m e f o r m o f ' d y n a m i c scale
e c o n o m i e s ' m a y g o v e m the production o f patents,
but this effect is only apparent after a threshold level
14 These calculations were made by observing intervals of years
for given initial levels of patenting, over which the 95% confi-
dence interval of the product limit estimator first covers 0.5.
These intervals are selected from life tables where there is no
aggregation of intervals above 5 years.
 4~

Table 2
Business unit spell survival rates a .~

Spell Number of patents at the start of the spell Number of innovations at the start of the spell "~"
interval All 1 2 3 4 5+ All 1 2 3+
(years)

1-2 0.3037 (0.006) b 0.2333 (0.007) 0.4528 (0.019) 0.6315 (0.032) 0.7225 (0.048) 0.8899 (0.03) 0.1404 (0.0064) 0.1293 (0.0066) 0.1457 (0.0238) 0.3197 (0.0544)
2-3 0.1579 (0.005) 0.1003 (0.005) 0.2492 (0.017) 0.3927 (0.033) 0.5463 (0.054) 0.815 (0.037) 0.0421 (0.0039) 0.0372 (0.0039) 0.0578 (0.0142) 0.1492 (0.0421) ,....
3-4 0.0971 (0.004) 0.0527 (0.004) 0.1479 (0.014) 0.2737 (0.03) 0.3682 (0.052) 0.7392 (0.042) 0.0155 (0.0025) 0.0116 (0.0023) 0.0385 (0.0118) 0.055 (0.028)
4-5 0.0688 (0.004) 0.0319 (0.003) 0.097 (0.012) 0.2123 (0.028) 0.3078 (0.05) 0.6633 (0.046) 0.0066 (0.0016) 0.0048 (0.0015) 0.0116 (0.0066) 0.055 (0.028)
5-10 0.0313 (0.003) 0.0078 (0.002) 0.0429 (0.009) 0.1061 (0.023) 0.203 (0.045) 0.4373 (0.049) 0.0009 (0.0006) 0.0010 (0.0007) 0.0000 0.0000
10-15 0.0175 (0.002) 0.004 (0.001) 0.0169 (0.006) 0.0403 (0.016) 0.1093 (0.023) 0.3109 (0.046) 0.0000 0.0000
15-20 0.0089 (0.002) 0.0016 (0.001) 0.0101 (0.005) 0.0161 (0.011) 0.0298 (0.023) 0.18 (0.039) ,.~
20- 0.0089 (0.002) 0.0016 (0.001) 0.0101 (0.005) 0.0161 (0.011) 0.0298 (0.023) 0.18 (0.039) .~.

LR 958.332 (0.000) 9.119 (0.01)

test c

a Life tables are based upon groups defined according to the number of patents and innovations in the first year of each spell, with 5178 patents spells between 1969 and 1988 and 3017
innovations spells between 1947 and 1982. I
b Numbers in parentheses are Greenwood (1926) standard errors. "~
oo
c LR test is a X2(4) (patents) or X2(2) (innovations) likelihood ratio test of the null of homogeneity of groups (p-value in parentheses); see Savage (1956) for details.
 P.A. Geroski et al./ Research Policy 26 (1997) 33-48 41

Table 3
Moments of key regressors by spell
Patents Innovations
Variable Regressor Mean(Std. Dev.) Variable Regressor Mean(Std. Dev.)
Patents Omitted 1.4812 (2.895) Innovations Omitted I. 1606 (0.489)
Start patents = 1 dummy pat1 0.7788 (0.415) Start innovations= 1 dummy innl 0.8803 (0.324)
Start patents - 2 dummy pat2 0.1391 (0.346) Start innovations= 2 dummy inn2 0.0947 (0.293)
Start patents = 3 dummy pat3 0.0434 (0.204) Start innovations= 3 + dummy OmiUed 0.0250(0.156)
Start patents = 4 dummy pat4 0.0173 (0.130) Independentownershipdummy owner 0.5864 (0.493)
Start patents = 5 + dummy Omitted 0.0214(0.211) Owned ownershipdummy Omitted 0.4130(0.493)
Parent dummy Omitted 0.1749(0.379) Growth in manufacturingoutput growth 0.0188 (0.045)
Subsidiary dummy subsid 0.7569 (0.429) Innovationsspillover ispill 0.2252 (0.418)
Associate dummy assoc 0.0465 (0.211) Employment emp 0.0067 (0.037)
Mixed ownershipdummy mixed 0.0216 (0.145)
Growth in manufacturing growth 0.0050 (0.044)
output
Patents spillover pspill 2782.823(459.121)
Observations 4859 Observations 2957

of initial patenting which only 74 (2.24% of) patent-
ing firms ever reach, t5
3.2. The persistent production o f major innovations
The innovations data are taken from a study done
by the Science Policy Research Unit (SPRU) at the
University of Sussex, which identified all business
units in Britain that produced a 'commercially suc-
cessful and technologically important' innovation in
Britain between 1945 and 1982. 16 There were a
total of 1624 innovating units belonging to 1332
parent firms in the data. In the analysis which fol-
lows, we concentrate on the business unit as the
main 'innovating unit' of interest, but results for the
parental group as a whole ('the parent firm') are also
considered as a robustness check.
15These conclusions are not inconsistent with those of Cefis
(1996), who analysed the patents of 577 UK firms registered at
the European Patent Office over the period 1978-1991, although
she puts more emphasis on the first patent as the right threshold
than we have. See also Malerba and Orsenigo (1995) for a
somewhat different analysis.
16The SPRU database runs to 1983, but this year was dropped
due to the fact that the survey was conducted mid-year and there
was a large drop in the number of recorded innovations as a
consequence.
The distribution of innovations shows much simi-
larity to the distribution of patents. Most units pro-
duced only one innovation, and most innovation
spells only last for one period (see Appendix B for
more details). There are on average only a total of
2.66 innovations per business unit (and a median of
one). The distribution is highly skewed (5.59 centred
on zero). Table 1 gives the frequency distribution of
innovation spells for all spells and for the longest
spell for business units. The 1624 units have 3017
spells between them (the 1332 parent firms have
2449 spells). There are very few units or firms with
spells of more than two periods (5.14% and 5.19%
respectively). Table 2 presents the life table for the
innovating unit's spells. The spells are divided into
three groups depending on the number of innova-
tions in the initial period (accounting for 8%, 16%
and 76% of all innovations produced). Group 1 had
only one innovation at the start of a spell, group 2
had two innovations and group 3 three or more.
What is clear from these tables is that spells last
longer the greater is the initial burst of innovative
activity. Only 19% of units that began a spell with
only a single innovation had an expected spell of
greater than a single period (and 70% of these ended
after two periods). By contrast, of the units that
produced three or more innovations at the start of the
spell, 58% lasted for two years or more. Recall that
only 71 spells (under 5%) passed this initial thresh-
42 P.A. Geroski et al. / Research Policy 26 (1997) 33-48

Table 4
Weibull regressions of patent spells ~
(i) (ii) (iii)
pat1 -2.0089 (0.083) b -- 1.3943 (0.134) -- 1.392 (0.134)
pat2 -- 1.5227 (0.087) -- 0.9626 (0.137) -- 0.9693 (0.136)
pat3 -- 1.0838 (0.097) --0.6731 (0.145) --0.6779 (0.144)
pat4 --0.7494 (0.117) --0.3112 (0.164) --0.3259 (0.163)
assoc -- 0.1443 (0.054) -- 0.1546 (0.054)
subsid - 0.1567 (0.028) - 0.1643 (0.028)
mixed - 0.0807 (0.075) - 0.0825 (0.075)
growth 0.4418 (0.238) 0.4969 (0.236)
pspill 0.0899 (0.022) '
Pseudo R 2 0.1697 0.0842 0.0893
Model x 2 ( k - 1) d 1680.359 (0.000) 756.743 (0.000) 773.568 (0.000)
1/a 0.719 (0.006) 0.669 (0.006) 0.665 (0.006)
Jaggia X2(3) ~ 0.000 (l.0) 0.000 (1.0) 0.000 (1.0)
Log likelihood - 5302.248 - 4653.981 - 4654.569

" Dependent variable is the log of time until failure; method of estimation is m a x i m u m likelihood; all regressions contain an intercept;
estimated on 4859 spells between 1970 and 1988.
b Standard errors given in parentheses beside estimated coefficients. Coefficient standard errors are conditional on l / o r , the standard error
of which is conditional on estimated coefficients.
c Coefficient and standard error on pspill have been scaled up by 1000.
d x 2 ( k _ 1) is a W a l d test of the joint significance of coefficients on variables where k is the number of regressors ( p - v a l u e in parentheses).
e Jaggia X 2(3) is a conditional Weibull moment specification test of the generalised residuals ( p-values in parentheses). The null hypothesis
is that the residuals have the expected theoretical moments. See Jaggia (1991) for details.

Table 5
Weibull regressions of innovation spells a
(iv) (v) (vi) (vii)
inn1 - 0.3890 (0.060) b -- 0.3589 (0.059) -- 0.3377 (0.059) -- 0.3084 (0.059)
inn2 -- 0.2466 (0.005) -- 0.2212 (0.066) -- 0.2250 (0.066) -- 0.1906 (0.066)
owner 0.1607 (0.019) 0.1663 (0.019) 0.1603 (0.019)
growth - 0.2086 (0.214) - 0.1738 (0.212) - 0.2011 (0.211 )
emp 1.1627 (0.283) 8.550 (1.626)
emp 2 - 68.292 (16.616)
emp 3 179.520 (50.778)
emp 4 - 139.670 (43.51)
ispill c 0.0514 (0.022) 0.0570 (0.022)
Pseudo R2 0.0115 0.0284 0.0346 0.0390
Model x 2 ( k - 1) d 71.966 (0.000) 137.55 (0.000) 167.875 (0.000) 188.125 (0.000)
1/or 0.500 (0.005) 0.493 (0.005) 0.490 (0.005) 0.488 (0.005)
Jaggia X2(3) e 0.000 (1.0) 0.000 (1.0) 0.000 (1.0) 0.000 (1.0)
Log likelihood -2037.450 - 1997.200 - 1983.003 - 1970.955

a Dependent variable is the log of time until failure; method of estimation is m a x i m u m likelihood; all regressions contain an intercept;

estimated on 2957 spells between 1947 and 1982.

b As note b to Table 4.
ispill = 1 (spillover) if there are more than 11 innovations in the unit's 2-digit (SIC) industry.
d As note d to Table 4.
e As note e to Table 4.
 P.A. Geroski et al. / Research Policy 26 (1997) 33-48
old. As with patents, the hurdle rate to enjoy dy-
namic economies appears to be very high indeed.
3.3. The determinants of hazard rates
To analyse the issue of duration dependence and
check that the informal analysis shown in Tables 1
and 2 is not seriously misleading, we turn to esti-
mates of the Weibull model. The major limitation
that we face is that of obtaining information on
potentially important determinants of spell length
other than the initial level of patenting or innovation.
Our two databases contain relatively little informa-
tion other than the measures of innovative output
production which we are using, and it is very diffi-
cult to link them to other databases that have useful
information on individual firms without greatly re-
ducing our sample sizes. However, we have been
able to introduce several control variables which
enable us to undertake at least a limited assessment
of the results. These are: ownership structure,
macroeconomic growth, spillovers and, in the case of
the innovation data set, firm size. Definitions and
moments of these variables are shown in Table 3,
Weibull regressions of patent spells are shown in
Table 4 and Weibull regressions of innovation spells
are shown in Table 5.
Regression (i) in Table 4 shows very clearly that
firms that commence a spell with only a single
patent in year t are very much less likely to patent in
t + I than firms that commence a spell with 5 or
more patents (which is the omitted dummy). Further,
the degree of relative disadvantage declines smoothly
as the initial level of patenting rises. Regressions (ii)
and (iii) show that these conclusions are qualitatively
robust to the inclusion of information on ownership
structure, macroeconomic growth and spillovers.
However, the raw data do overstate the degree of
association between the initial level of patenting and
the length of subsequent spells, not least because
spell lengths are enhanced by spiliovers, last longer
in booms and are observed to be more persistent in
corporate parents than in subsidiaries. All of this
said. it is also evident that many spells seem to be
long (or short) simply by chance.
The basic story is similar when we examine spells
of major innovation production. As regression (iv) in
Table 5 shows, firms that begin spells with fewer
43
innovations have, on average, significantly shorter
innovation spells. This result is robust across all of
the experiments which we conducted. Regression (v)
includes a measure of whether the unit was definitely
independent of any parent and the growth of aggre-
gate demand in the economy. Being independent has
a strongly positive effect on spell length, whereas the
demand variable is insignificant. Regression (vi) in-
cludes a measure of the size of the unit (the number
of employees at the start of the spell) and a proxy for
spillovers (a dummy equal to one if there were more
than eleven innovations used in the firm's principal
two-digit industry) ~7. There is evidence that larger
units have longer spells and there are some spillover
effects. Finally, regression (vii) introduces a polyno-
mial of fourth order in firm size. As with Pavitt et al.
(1987), who analysed the influence of size on inno-
vation intensity, we find evidence of a highly non-
linear relationship. However, despite the fact that the
higher order terms are significant at conventional
levels, the earlier results are all robust to this more
flexible functional form.
One common feature of the regressions shown in
Tables 4 and 5 (and, indeed, of virtually all of the
regressions we ran) is that the data are strongly
inconsistent with the hypothesis of negative duration
dependence. Recall that in the Weibull model, Aft)
= yat,~- 1, so A'(t) < 0 if a < 1, or 1/o~ > 1. For
the patents data 1 / a -~ 0.5, while for major innova-
tions l / a - - - 0 . 7 , implying in both cases that c~
clearly exceeds unity. Coupled with the existence of
(rather high) threshold effects, this suggests the fol-
lowing interpretation of the data: while dynamic
economies may lead to longer, more persistent spells
of innovation by .firms, they do so only when the
threshold of initial or pre-spell innovative activi~ is
high enough to temporarily overcome strong within-
spell forces which appear to retard the production of
innovation. Put more simply, 'success only follows
~7 Including a simple count of the number of industry innova-
tions used was also positive, but less well determined. The effect
is driven by the very highly innovative industries only. Experi-
ments were also tried with including the number of innovations
produced in the unit's region and the number of innovations
produced in the unit's industry. These variables had no obvious
effect on spell length.
44 P.A. Geroski et aL / Research Policy 26 (1997) 33-48
really major success, and then for only a limited
period of time'.
Finally, four incidental observations about these
results are worth making.
First, the fact that demand growth has a negative
but not significant effect on the length of innovating
spell contrasts somewhat with studies of the inci-
dence of innovation which often show signs of a
positive effect of demand on innovation (see, for
example, Geroski and Waiters, 1995, and references
cited therein), as well as with the positive effect of
demand growth on patenting. The best explanation of
this that we have uncovered derives from work
which suggests that increases in cash flow (which
varies in a strongly procyclical fashion) induces firms
to bring forward innovations (Geroski et al., 1995),
leading to a bunching of innovation production that,
ceteris paribus, reduces innovating spell length. 18
Second, spillovers appear to have a positive (if rather
modest) effect on spell length, something that does
not seem to be a feature of innovation incidence
models using these data (see Geroski et al., 1995) or
of models of the determinants of corporate profits,
growth or industry productivity growth (see Geroski,
1994). The obvious conclusion is that spillovers
stimulate innovativeness largely because they affect
the number of follow-up innovations that a firm
produces given that it has already produced an inno-
vation at time t, rather than because they affect the
number produced at t. This is consistent with the
view that innovations produced at t increase a firm's
absorptive capacity, enabling it to benefit from
spillovers and innovate longer than would otherwise
have been the case. Third, it seems clear from Table
5 that independent innovating units (marginally) out-
perform subsidiaries as persistent innovations, pre-
sumably because stronger investment incentives out-
weigh any failure to exploit economies of scope. 19
Fourth and finally, persistent innovation is not
strongly linked to firm size, although there does
seem to be a positive relation between the length of
is One of our referees suggested that faster growth in demand
may increase product turnover and, therefore, shorten product life
cycles. This reduces the profitability of any individual innovation
and may reduce the length of innovation spells.
19For work on the relationship between diversification and
innovation, see Nelson (1959), Scott (1993) and others.
innovation spells and firm size. To explore whether
the same relationship holds in the case of patenting
spells, we focus on a smaller sample of 250 firms for
which we have information on firm size. 20 Weibull
regressions for this sample produced results similar
to those shown in regression (vi) in Table 5; i.e. with
small, positive coefficients on pre-spell firm size
(measured by turnover). These estimates were robust
to the inclusion of a wide range of other variables
(such as capital intensity and export intensity), and
of about the same order of magnitude in patent spell
regressions as in innovation spell regressions. These
size effects are, however, small. The average size of
firms having patenting spells of 1. . . . . 7 years is
£128m, £254m, £173m, £147m, £321m, and £171m;
for innovation spells of length 1. . . . . 7 years average
size is: £379m, £486m, £825m, £809m, £235m, and
£639m. The simple fact is that pre-spell patenting or
innovation activity has a much more powerful effect
on spell length than firm size.
4. Conclusions
Many economists interested in innovative activity
have argued that the evolution of technology is, at
least in part, endogenous. There are two senses in
which this might be true. The first is the rather broad
sense of endogenous which corresponds to the notion
that 'technology responds to market forces', an ob-
servation which has often led people to examine the
relative strength of 'supply push' and 'demand pull'
models of innovation. Most scholars would be reluc-
tant to dispute the assertion that technology responds
to market forces in the sense that demand can stimu-
late innovative activity, although there is very little
agreement on how large an effect demand has. 21
A second sense in which the evolution of technol-
20This is essentially the sample used in Geroski et al. (1995)
(or, rather, those firms in that sample who innovated or patented
between 1972 and 1982). On average, these firms produced 40
patents and 5 innovations; as a sample, this group of firms
produced fewer one-year spells than the full sample discussed
earlier.
21 See Geroski and Waiters (1995) for work on the effect that
demand changes over the cycle have on patents and major innova-
tions; for a recent survey of other empirical work on the determi-
nants of innovation, see Cohen (1995).
 P.A. Geroski et al. /Research Policy 26 (1997) 33-48
ogy might be endogenous is captured in the notion of
'dynamic economies of scale', namely the possibility
that increases in the volume of innovations produced
by a finn at any one time increase the likelihood that
it will continue innovating subsequent to that time.
The kinds of arguments that support this view are
often summarized by a phrase such as 'success breeds
success', and they command fairly widespread, if
rather imprecise, support in the profession. Widely
held or not, the simple fact is that they are a little
hard to reconcile with the data which we have
analysed here. Most firms that produce a patent or a
major innovation do so only once, and the very few
firms that achieve a spell of patent or innovation
production of any length (say three to five successive
years) generally do so only when they have passed a
relatively high initial threshold of five or more patents
and three or more major innovations. Further, spells
during which firms produce patents or major innova-
tions never display any sign of negative duration
dependence. Even when firms cross the initial
thresholds identified above, the events which occur
during the subsequent innovation spell are powerful
enough to sharply limit its duration. In short, it is
very hard to find any evidence at all that innovative
activity can be self-sustaining over anything other
than very short periods of time, at least for the kinds
of innovative activity that we have focused on here.
There are at least two areas of theoretical work
which these results cast some interesting light on.
The first is the literature on patent races, which has
explored the conditions under which monopoly mar-
ket structures will persist, Most of the dynamics in
these models are driven by two effects: the 'replace-
ment effect', which makes firms reluctant to inno-
vate in period t for fear that they will cannibalize
rents generated from innovations which they intro-
duced prior to t, and the 'pre-emption effect', which
generates an incentive for a firm that innovated in
period t to innovate again in t + 1 to realize gains
from exploiting both innovations jointly. 22 The re-
placement effect arises when successive innovations
22The terms are based on Tirole (1988, pp. 392-393). The
'replacement effect' was identified in the classic paper by Arrow
(1963), while the 'pre-emption effect' was discussed by Gilbert
and Newberry (1982) (amongst others). See Beath et al. (1995) for
a recent survey of models of technological competition.
45
are substitutes, while the pre-emption effect arises
when they are complements. Our data show very
little sign that innovators in period t also innovate
again in t + 1 (or subsequently), and, in this limited
sense, suggest that the replacement effect is the
stronger determinant of industry dynamics (an obser-
vation consistent with countless case studies). This
implies that monopoly market structures are unlikely
to persist for long periods of time (an observation
that is also generally consistent with many case
studies).
The second body of theorizing that our results
cast some light on is the process of growth and
development, as discussed in recent macroeconomic
theories of endogenous growth and in theories of the
'dynamic capabilities of firms'. 23 Both of these
bodies of literature focus on sources of increasing
returns which might sustain growth (particularly in
the face of diminishing returns created by conven-
tional factor scarcity). This means concentrating on
knowledge accumulation and the underlying ability
of firms/economies to absorb and then productively
use knowledge. Since knowledge often is a public
good, each increment of knowledge gained can facil-
itate the acquisition of the next increment. Our ob-
servations sit uncomfortably alongside this kind of
theorizing. Although some firms do innovate persis-
tently, only a very few do and they do not enjoy very
long innovation spells. This might mean that very
few firms have genuine 'dynamic capabilities', or
that such capabilities lead to only very' short-lived
advantages. Further, although it is hard to believe
that the accumulation of knowledge does not display
some sort of increasing returns in the production of
subsequent knowledge, it seems to be the case that
such processes of knowledge generation can yield
sharply diminishing returns when knowledge is em-
bodied in new goods or in patents. Given this, it is
hard to believe that knowledge accumulation leads to
the kinds of permanent increases in growth rates
posited by endogenous theories of growth, or sus-
tained competitive advantage by firms.
2, On endogenous growth, see the recent surveys by Grossman
and Helpman (1991) or Barro and Sala-i-Martin (1995). Theories
of 'dynamic capabilities' focus on how firms accumulate techno-
logical capabilities which might underlie sustained competitive-
ness; see Teece and Pisano (1994), and references cited therein.
46 P.A. Geroski et aL / Research Policy 26 (1997) 33-48
Finally, these results carry one further implica-
tion, and that is that public policy to support innova-
tion and patenting is likely to be rather expensive. It
is clear that any kind of support for a particular
activity will yield much larger benefits if increasing
returns generate a more than proportionate rise in
output relative to the increase in input generated by
the support. Other knock-on effects such as spillovers
which give rise to positive feedback will, of course,
magnify the benefits of any given level of support.
Making public policy more effective is at least in
part a matter of targeting it at activities that display
such 'dynamic economies of scale'. Popular discus-
sions of industrial policy usually single out innova-
tive activity as a prime example of a potentially
productive public policy target. Our results suggest
that the threshold levels of innovative activity trig-
gering 'dynamic economies of scale' are rather high,
and therefore, that it is easy to exaggerate the poten-
tial gains that will be realized from this type of
support.
Acknowledgements
We are indebted to the Gatsby Foundation and the
ESRC for financial support, and to Hugh Wills, Ron
Smith, Giovanni Urga, Dennis Mueller, Keith Pavitt,
Jos6 Mata, Katy Graddy and three referees for help-
ful comments. The usual disclaimer applies.
Appendix A. How often do firms patent?
There were 1649 firms with a single spell of I
year, 9.3% of which are left censored and 5.2% right
censored (spell length adjusting for this right-censor-
ing is 1.055 years for all 1649 firms). Mean total
patents for those left censored is 1.261 (median 1
patent) and 1.169 (median 1 patent) for those not.
Mean patents for the 1410 firms neither left nor fight
censored is 1.103. Of these 1649 firms, 1505 patent
just once in their 1-year spell, although 8.7% are left
censored and 5.2% fight censored.
There were 498 firms with multiple spells of 1
year's length. These firms have 1162 spells in total,
with between 2 and 6 each (mean number of spells is
2.519, standard deviation 1.324 spells). Of these
spells, 7.6% are left censored and 3.7% right cen-
sored (spell length adjusting for right-censoring is
1.038 years for all 1162 spells). Mean patents per
spell are 1.235 for the 1074 spells that are not left
censored, and 1.273 patents for the 88 spells that are.
There are 663 gaps between these 1162 spells, which
are 4.089 years long on average (standard deviation
2.797 years), ranging from a minimum of 2 years to
a maximum of 17. Of these 498 firms, 410 are
uncensored, as are 1031 of their 1162 spells. Mean
patents per spell for these spells are 1.181 (standard
deviation 0.484 patents) and the 621 gaps between
these spells have mean length of 3.981 years (stan-
dard deviation 2.598 years, minimum 2 years, maxi-
mum 17 years).
Of these 498 multiple 1-year patentors, 342 had
just 1 patent in each of their 1-year spells. There are
770 of these spells, 6.5% of which are left censored
and 3.9% of which are right censored (the spell
length was 1.041 years for all 770 spells). The 342
firms have on average 2.397 spells (standard devia-
tion 0.716 spells), with between 2 and 5 spells each.
The 427 gaps between these spells have mean length
of 4.368 years (standard deviation 2.961 years, mini-
mum 2 years, maximum 17 years). Of these 342
firms, 292 are uncensored, as are their 690 spells.
These firms share from 2 to 5 spells between them
(mean 2.412 spells, standard deviation 0.726 spells),
with gaps of between 2 and 17 years between spells
(mean 4.234 years, standard deviation 2.742 years).
The remaining 646 firms had multiple spells that
are not all of 1 year but are less than fifteen years.
There are 1850 of such spells, between 2 and 7 per
firm (mean 3.285 spells, standard deviation 1.28
spells), 11.8% of which are left censored and 5.8%
right censored. Mean length for the 1632 spells that
are not left censored is 2.15 years (median 2 years),
with 3.959 patents per spell (median 2 patents). For
the other 218 spells that are left censored, mean
length is 3.188 years (median 2 years) with 11.936
patents per spell (median 3 patents). The 1204 gaps
between these spells are between 2 and 16 years long
(mean 3.272 years, standard deviation 2.035 years).
Of these firms, 428 are neither left nor right cen-
sored, nor are 1524 of their spells. These firms also
have between 2 and 7 spells (mean 3.299 spells,
standard deviation 1.282 spells), which are on aver-
age 1.961 years long (standard deviation 1.529 years,
 P.A. Geroski et al. / Research Policy 26 (1997) 33-48
minimum 1 year, maximum 13 years) with 3.393
patents per spell (standard deviation 6.211 patents,
minimum 1 patent, maximum 159 patents). The 1096
gaps between these uncensored spells have mean
length of 3.222 years (standard deviation 1.946
years), ranging from 2 to 15 years.
There were 459 firms with a single spell of
between 2 and 14 years' duration, 22.2% of which
are left censored and 13.2% right censored. Mean
spell length is 3.858 years (median 2 years) with
9.983 patents, for the 357 firms not left censored and
4.363 years (median 3 years) with 19.304 patents,
for the 102 left censored firms. Mean spell length for
the 296 uncensored firms is 2.882 years with 5.534
patents.
There were 58 firms that patented persistently
with at least 1 spell of 15 years or more; 6 of these
firms had two spells. Of course, these six firms have
the six spells in the tail of the length distribution for
two spells (ie. 15 to 17 years). Unsurprisingly, 82.7%
of these 52 firms are left censored and 59.6% of
them right censored. Of the 58 spells they share
between them, 74.1% are left censored and 53.4%
right censored. Mean spell length of the 15 spells not
left censored is 26.667 years (median 17 years) with
222.167 patents (median 196 patents). The remaining
43 left censored spells have mean duration of 37.476
years with 723.571 patents. Of the 6 firms with
multiple spells, 50% of their 12 spells are left cen-
sored and 25% right censored (all of the firms are
left censored and half right censored). Mean spell
length of the 6 left-uncensored spells is 2.667 years,
with 4.333 patents, and 16.167 years (with 139.167
patents) for the 6 left-censored spells. The mean
length of the gap between these two spells is 2.5
years (standard deviation 0.837 years). Of these 6
firms, 3 (and their 6 spells) are neither left nor right
censored. The mean spell length of these 6 spells is
8.833 years but with a large standard deviation of
8.589 years (this is because the range of lengths is 1
to 17 years, as the preceding analysis would lead us
to expect). The mean number of patents in these 6
spells is 75.667 (standard deviation 94.225 patents).
The 3 gaps between these 6 spells are all 2 years
long.
Of the 58 persistent patentors, 22 produced at
least 1 patent in all 20 years. Clearly all these firms
and their single spells are both left and right cen-
47
sored, which means that adjusted mean and median
lengths and patents cannot be computed since there
are no uncensored spells as a basis for comparison.
Nonetheless, unadjusted mean patents are 541.727
(standard deviation 788.079 patents) ranging from a
minimum of 63 patents to a maximum of 3643.
Appendix B. How often do firms produce major
innovations?
There were 942 units that only produced one
innovation (58%), 240 (15%) produced 2 and 121
(7.5%) a total of 3 over the whole period. The
highest total number of innovations was 53.
There were 1624 units that produced at least 1
innovation. Only one of these is right censored and
none are left censored. Thus censoring does not
appear to be a serious problem in the innovations
data due to the long time series and the relatively
short innovation spells. Of these units, 16.6% had 2
spells and 8.5% 3 spells. The maximum number of
spells was 11 (only 1 firm managed this).
There were 1027 units out of the 1624 that only
produced a spell of a single year and 597 units with
multiple spells. Of these 597, 376 multiple spellers
had a length of only a single year. And 277 of these
376 only had 1 innovation in their spell. Of the 320
multiple spell units the number of spells ranged
between 2 (29%) and 11 (just 1 unit). The 1027 units
with a single spell had a spell Length ranging be-
tween 1 and 10 years.
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