How Do Constraints Affect the Survival of Innovative Firms?

When taking new offerings to the market, innovative firms face constraints more often than less innovative firms. We confirm that firms with higher innovation intensity, higher novelty, and greater search intensity experience more constraints with regards to human resources, financial capital, market barriers, and regulation. Research has looked at the impact of impediments on innovation performance and firm performance, but the link between constraints on innovation and survival is yet to be explored. We show that the constraints encountered by innovative firms positively affect survival in the medium term. Namely, the breadth of constraints experienced by firms in the introduction of their most recent innovation affects survival positively. To provide potential explanations for the finding, we discuss two mechanisms behind the positive relationship between constraints and survival. Building on the capabilities literature we theorize that a challenging environment stimulates organizational learning, and recognizing impediments in the environment is an essential strategic capability in succeeding with innovation. The creativity literature also lends an explanation from the positive effects of constraints on creativity. A novel survey linked to register data provides the empirical evidence for the study.