Innovation and firm growth in high-tech sectors: A quantile regression approach

We relate innovation to sales growth for incumbent firms in high-tech sectors. A firm, on average, experiences only modest growth and may grow for a number of reasons that may or may not be related to innovativeness. However, given that the returns to innovation are highly skewed and that growth rates distributions are heavy-tailed, it may be misleading to use regression techniques that focus on the average effect for the average firms. Using a quantile regression approach, we observe that innovation is of crucial importance for a handful of superstar fast-growth firms. We also discuss policy implications of our results.