Inventive capabilities in the division of innovative labor

We study how a firm's inventive capability conditions its participation in a division of innovative labor. Using a survey of US manufacturing firms, and treating inventive capability as unobserved, we estimate a finite-mixture model guided by simple theory linking inventive capability and product innovation outcomes. We find that firms' inventive capabilities condition how they benefit from different forms of external knowledge. High-capability firms' new-to-the-market product innovations benefit from externally available ‘raw’ knowledge, which contributes to the internal generation of inventions. They benefit less, however, from externally generated inventions. In contrast, less capable firms are more likely to acquire and commercialize external inventions, and more typically introduce new-to-the-firm, not new-to-the-market products.

Duke Scholars

Author Wesley M. Cohen Fuqua School of Business

Author Ashish Arora Fuqua School of Business