Does the market for ideas influence the rate and direction of innovative activity? Evidence from the medical device industry

Journal Article (Journal Article)

Prior work argues that the "market for ideas" supports an open system of innovation, allowing for efficient development of technology across firms. Although this literature has described important features of this market, how it influences the rate and direction of innovation remains an open question. We exploit an exogenous shock to a subset of U.S. medical device firms to study this question. We first document the breakdown in the market for ideas after a federal investigation made it more difficult for the leading orthopedic firms to work with physician-inventors. We then present evidence of a dramatic decline in the rate of innovation for these firms. Further, a marked shift in direction occurs toward lower-quality inventions and away from product categories where physician knowledge is critical.

Full Text

Duke Authors

Cited Authors

  • Chatterji, AK; Fabrizio, KR

Published Date

  • March 1, 2016

Published In

Volume / Issue

  • 37 / 3

Start / End Page

  • 447 - 465

Electronic International Standard Serial Number (EISSN)

  • 1097-0266

International Standard Serial Number (ISSN)

  • 0143-2095

Digital Object Identifier (DOI)

  • 10.1002/smj.2340

Citation Source

  • Scopus