Knowledge and creative destruction over the industry life cycle: The case of the German automobile industry

Abstract

The paper investigates how pre-entry experience, post-entry experience and innovative activity affected the survival of German automobile firms over the period 1886-1936. A statistical survival analysis is performed which links instrumental variable estimation with the Cox regression. The main results are that all three knowledge components exert an independent and significantly positive effect on firm survival. Moreover, innovative activity is able to compensate for post-entry experience, in accord with Schumpeterian creative destruction. © 2009 The London School of Economics and Political Science.