Product Innovation and Growth: The Case of Integrated Circuits

A puzzling evidence stemming from the applied research on growth and innovation is that successful innovations do not appear to have a significant effect on sales growth rates, at odds with the expectation that successful innovators will prosper at the expenses of their less able competitors. The present paper tests a research hypothesis claiming that the level of observation at which applied research is typically conducted hampers the identification of a significant association between innovation and sales growth rates. Exploiting a unique and original database comprising detailed information on product innovations by leading semiconductor companies, we find components commercialized in the nearest past to positively affect the stream of corporate revenues.