Advance Access published August 7, 2008 Firm age and innovation

We examine how firm age relates to innovtion quality, and how this relationship varies depending on the nature of technology. Using data on patents of COMPUSTAT firms, we find that firm age is negatively related to technical quality, and that this effect is greater in technologically active areas. The economic implication of this effect is substantial; each additional year reduces the impact of a 10 % increase in R&D intensity on the firm’s market value by over 3%. 1