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Are Inventors or Firms the Engines of Innovation?

Author

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  • Ajay Bhaskarabhatla

    (Erasmus School of Economics, Erasmus University, 3062 PA Rotterdam, Netherlands)

  • Luis Cabral

    (Stern School of Business, New York University, New York, New York 10012)

  • Deepak Hegde

    (Stern School of Business, New York University, New York, New York 10012)

  • Thomas Peeters

    (Erasmus School of Economics, Erasmus University, 3062 PA Rotterdam, Netherlands)

Abstract

In this study, we empirically assess the contributions of inventors and firms for innovation using a 37-year panel of U.S. patenting activity. We estimate that inventors’ human capital is 5–10 times more important than firm capabilities for explaining the variance in inventor output. We then examine matching between inventors and firms and find highly talented inventors are attracted to firms that (i) have weak firm-specific invention capabilities and (ii) employ other talented inventors. A theoretical model that incorporates worker preferences for inventive output rationalizes our empirical findings of negative assortative matching between inventors and firms and positive assortative matching among inventors.

Suggested Citation

  • Ajay Bhaskarabhatla & Luis Cabral & Deepak Hegde & Thomas Peeters, 2021. "Are Inventors or Firms the Engines of Innovation?," Management Science, INFORMS, vol. 67(6), pages 3899-3920, June.
    • Handle: RePEc:inm:ormnsc:v:67:y:2021:i:6:p:3899-3920
    DOI: 10.1287/mnsc.2020.3646
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    2. Gambardella, Alfonso, 2023. "Private and social functions of patents: Innovation, markets, and new firms," Research Policy, Elsevier, vol. 52(7).
    3. Liu, Guanchun & Lu, Di & Yang, Jinyu, 2023. "Innovation for promotion: The effect of executive involvement on inventors' innovation choice," Journal of Corporate Finance, Elsevier, vol. 80(C).
    4. Xun Wang & Jingwen Yu, 2023. "Accumulating human capital: Corporate innovation and firm value," International Review of Finance, International Review of Finance Ltd., vol. 23(4), pages 750-776, December.

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