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Radical and Incremental Innovation: The Roles of Firms, Managers, and Innovators

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  • Daron Acemoglu
  • Ufuk Akcigit
  • Murat Alp Celik

Abstract

We investigate the determinants of radical ("creative") innovations that break new ground in knowledge creation. We develop a model focusing on the choice between incremental and radical innovation and on how managers of different ages and human capital are sorted across firms. Firm- and patent-level evidence reveals that firms that are more "open to disruption" are significantly more likely to engage in radical innovation and hire younger managers and inventors with a comparative advantage in radical innovation. However, once the effect of the sorting is factored in, the (causal) impact of manager age on creative innovations, though positive, is small.

Suggested Citation

  • Daron Acemoglu & Ufuk Akcigit & Murat Alp Celik, 2022. "Radical and Incremental Innovation: The Roles of Firms, Managers, and Innovators," American Economic Journal: Macroeconomics, American Economic Association, vol. 14(3), pages 199-249, July.
    • Handle: RePEc:aea:aejmac:v:14:y:2022:i:3:p:199-249
    DOI: 10.1257/mac.20170410
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    Citations

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    Cited by:

    1. Murat Alp Celik & Xu Tian, 2023. "Agency Frictions, Managerial Compensation, and Disruptive Innovations," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 16-38, December.
    2. Byun, Seong K. & Oh, Jong-Min & Xia, Han, 2023. "R&D tax credits, technology spillovers, and firms' product convergence," Journal of Corporate Finance, Elsevier, vol. 80(C).
    3. Afees A. Salisu & Riza Demirer & Rangan Gupta, 2023. "Technological Shocks and Stock Market Volatility Over a Century: A GARCH-MIDAS Approach," Working Papers 202308, University of Pretoria, Department of Economics.
    4. Matteo Romagnoli, 2022. "Can electricity liberalisation foster the development of radical clean-energy technologies?," Working Papers 2022.44, Fondazione Eni Enrico Mattei.
    5. Ionela Tofan & Elena Condrea, 2022. "Business performance in IT. A multivariate regression analysis," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 217-226, Decembrie.
    6. Jevgenij Gladevich, 2022. "Assessment of the innovation potential of the regions of Latvia, Lithuania and Belarus," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 10(1), pages 293-327, September.
    7. Romagnoli, Matteo, 2022. "Can electricity liberalisation foster the development of radical clean-energy technologies?," FEEM Working Papers 329738, Fondazione Eni Enrico Mattei (FEEM).
    8. FUKUGAWA Nobuya, 2023. "Determinants of Commercialization Modes of Science: Evidence from panel data of university technology transfer in Japan," Discussion papers 23053, Research Institute of Economy, Trade and Industry (RIETI).

    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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