Subcontracting and firm growth: disentangling the effects of innovation type, level, and appropriability

This article investigates how innovation matters for the growth of subcontracting and non-subcontracting firms. In particular, it explores whether the effects of innovation type, level, and appropriability on firm growth differ between subcontractors and non-subcontractors. Data on Korean firms in the manufacturing sector are analysed. The impact of subcontracting on firm growth is found to be insignificant. In addition, the positive effect of the process innovation level on firm growth is found to be relatively greater for subcontractors, while the positive effect of the product innovation level on firm growth is found to be relatively greater for non-subcontractors. Innovation appropriability significantly increases firm growth for subcontractors only, not for non-subcontractors. These findings imply that firm-level heterogeneities in the suppler-buyer relationship, innovation goals and novelty, and the effectiveness of innovation protection jointly influence the impact of innovation on firm growth.