Innovate to Survive: The Effect of Technology Competition on Corporate Bankruptcy

摘要

This paper establishes a strong relation between technology competition and corporate bankruptcy. Using detailed firm-level patent data, we show that: I) the capability of firms to innovate predicts future bankruptcies better than the typical measures such as Z-score and credit rating, 2) technology-related bankruptcies are less sensitive to the business cycle and industry success, and 3) firms that go bankrupt as a result of technology competition experience larger declines in earnings and stock prices.