The Private Value of Innovating for the Government

National Bureau of Economic Research · 2025-05-01 · 3 citations

We quantify the private returns to government R&D contracts awarded to firms.We present new evidence that R&D contracts not only finance innovation but also embed an implicit government guarantee of noncompetitive future procurement for the winning R&D contractor.We measure its private value by analyzing stock market reactions to news about R&D contract awards.Using all federal R&D contracts awarded to U.S. publicly traded firms from 1984 through 2015, we find that the average private return on an R&D contract is 19 times its maximum potential revenue.However, returns are highly skewed, with only 7.5% of firms receiving at least one top-quartile contract.Private returns are linked to future production contracts, but only for noncompetitive awards to vertically integrated or large firms.These results suggest that a procurement regime bundling R&D and production contracts enhances value for firms with production capability.We develop a conceptual framework to clarify this innovation policy lever.

The reorganization of the American innovation ecosystem and the challenge of translating science

Industrial and Corporate Change · 2025-09-14

Abstract In this paper, we focus on lack of translational research as a potential explanation for the recent slowdown in productivity growth, as opposed to a slowdown in science or the decline in the novelty of science. We provide evidence that the translation of science (as measured through citations by patents) has dropped for novel science. This drop is correlated with the withdrawal of large firms from science (especially the physical sciences), as measured through their publications. Fields where venture capital-backed startups have entered have experienced an increase in the translation of science, but their entry has largely occurred in the life sciences and Information and Communication Technology. Sectors such as chemicals and materials science have instead been neglected, both by large firms and startups. Our results point to the role of large firms and their labs in facilitating the translation and commercialization of science. A growing division of innovative labor may have delivered gains from specialization in the production and use of science in some sectors, but appears to have left a void in others.

The Private Value of Innovating for the Government

SSRN Electronic Journal · 2025-01-01

The Rise of Absorptive Research in Corporate America: 1945-1980

SSRN Electronic Journal · 2025-01-01

The Rise of Absorptive Research in Corporate America: 1945-1980

National Bureau of Economic Research · 2025-04-01

We study the post-World War II "Golden Age" of American corporate research from 1945 to 1980, using multiple indicators of corporate research activity.We use an ensemble learning approach to classify firms as either Science Leaders, Absorbers or Followers.Our analysis reveals that only a small fraction of firms, whom we call Leaders, invest in internal research that is on the scientific frontier, with the objective to generate breakthrough inventions.Absorbers invest in research principally to absorb external scientific discoveries to fuel their inventive activity.Followers typically generate incremental innovations, using older scientific knowledge.Consistent with this, we find Leaders were more likely to be at the technological frontier, enjoy greater market power, and benefit from government procurement contracts.As universities and startups began to commercialize academic discoveries, the need for "absorptive corporate labs" declined.The shift ultimately transformed the American innovation landscape, deepening the division of innovative labor between universities, startups, and incumbent corporations, with only a select group of Leader firms continuing to invest in basic science.

The Private Value of Innovating for the Government

SSRN Electronic Journal · 2025-01-01

Inventive capabilities in the division of innovative labor

Economics of Innovation and New Technology · 2025-08-11 · 1 citations

We study how the inventive capability of a firm conditions its participation in a division of innovative labor. Capable firms are, by definition, able to invent; for them, external inventions substitute for their own R&D. However, external knowledge is an input into internal invention, and thus, more valuable to firms with inventive capability. Using a simple model of innovation and imitation, we explore how inventive capability affects a firm’s R&D investments, and thus whether and how it innovates, imitates, or does neither. Further, we study how these outcomes are conditioned by the supply of external knowledge as well as the supply of external inventions. In an advance over the literature, we treat firm inventive capability as unobserved, and use a latent class multinomial model to infer its value. Using a recent survey of product innovation and the division of innovative labor among US manufacturing firms, we find that high capability firms tend to use internal, rather than externally generated inventions, to innovate, and they use external knowledge to enhance their internal inventive activity. By contrast, lower capability firms are more likely to introduce “me-too” or imitative products, and when they innovate, are more likely to rely on external sources of inventions. Our findings suggest the successful pursuit of R&D-led growth depends both on firm inventive capability and the external knowledge environment.

The Rise of Scientific Research in Corporate America

Organization Science · 2024-12-17 · 9 citations

It is widely believed that university and corporate research are complementary: companies invest in research in part to develop the capacity to absorb the knowledge emerging from universities. However, as we show in this paper, corporate research in the United States emerged when American universities were behind the world frontier in scientific research. Why, then, did for-profit businesses choose to invest in creating new knowledge, much of which could spill over to rivals, and whose conduct presented many managerial challenges? We argue that corporate research in America arose in the 1920s to compensate for weak university research, not to complement it. Using newly assembled firm-level data from the 1920s and 1930s, we find that companies invested in research because inventions increasingly relied on science but American universities were unable to meet their needs. Large firms close to the technological frontier and operating in concentrated industries were likely to invest in research, especially in scientific disciplines where American universities lagged behind the scientific frontier. Corporate science seems to have paid off, resulting in novel patents and high market valuations for firms engaged in research. Funding: A. Arora, S. Belenzon, and J. Suh acknowledge support from the Fuqua School of Business, Duke University. S. Belenzon and Y. Yafeh gratefully acknowledge financial support from the Israel Science Foundation [Grant No. 963-2020]. K. Kosenko is grateful for support from the Bank of Israel. Y. Yafeh acknowledges support from the Krueger Center at the Hebrew University of Jerusalem School of Business. Supplemental Material: The online appendix is available at https://doi.org/10.1287/orsc.2023.18053 .

The Frontier Research in Commercialization and Diffusion of Science

Academy of Management Proceedings · 2024-07-09

The symposium on the diffusion and commercialization of science delves into the critical role of scientific knowledge in driving innovation and economic growth. It addresses the challenges and strategies involved in using publicly available scientific knowledge for commercial applications. The symposium brings together researchers studying the commercialization and diffusion processes, focusing on how firms access and utilize scientific knowledge, the role of universities and scientists in the diffusion of scientific knowledge, and the impact of successful commercialization on science itself. These papers range from the development of novel measures to examine the commercial potential of scientific research to exploring the impact of media and social media in disseminating scientific knowledge and investigating the interplay between corporate and academic research in the development of enabling technologies like quantum computing. Given the decline in corporate science over the last few decades, the challenge for firms is effectively leveraging scientific discoveries from universities and research institutions. The papers in the symposium offer important implications for businesses and research institutions striving to bridge the gap between scientific research and commercial application. Commercial Potential of Science and its Realization: Evidence from a Measure Using a LLM Author: Roger Masclans Armengol; Fuqua School of Business, Duke U. Author: Sharique Hasan; Fuqua School of Business, Duke U. Author: Wesley Cohen; Duke U. The Folding Effect: Dimensional Shifts and Reorientation in Organizational Search Author: Sukhun Kang; UC Santa Barbara Escaping the Ivory Tower: Media Coverage and the Commercial Diffusion of Science Author: Saqib Mumtaz; Haas School of Business, UC Berkeley Exploring the Role of Social Media in the Diffusion of Research Author: Yotam Sofer; Copenhagen Business School - Department of Strategy and Innovation Overcoming the Division of Labor in Scientific Research for Complementary Innovation Author: Avi Goldfarb; U. of Toronto, Rotman School of Management Author: Jino Lu; Washington U. in St. Louis, Olin Business School Author: Florenta Teodoridis; California Southern U.

Study the Indian Judiciary's part in Ensuring domestic workers human rights

Journal of Advances and Scholarly Researches in Allied Education · 2024-10-01

Domestic workers are a vulnerable and underappreciated part of the workforce, and this research looks at how the Indian court has played a key role in protecting their human rights. Due to the informal nature of their employment and the absence of particular regulation, domestic workers often endure exploitation, abuse, and denial of fundamental rights, notwithstanding constitutional guarantees under Articles 14 and 21. Fair salaries, safe working conditions, and placement agency regulation are just a few of the topics that have been addressed in landmark court decisions that this study examines. This article discusses the efforts of the judiciary to provide domestic workers with legal safeguards, focusing on seminal decisions such as People's Union for Democratic Rights v. Union of India (1982). Social and cultural considerations, lack of legal education, and institutionalized prejudices are some of the obstacles that domestic workers confront while trying to get justice. It takes a look at judicial initiatives to promote social justice, bonded labour, and situations involving children as domestic workers. Despite the efforts of the court, the study shows that there are still major obstacles. To completely safeguard the human rights of domestic workers in India, it stresses the necessity of thorough legislation, systemic changes, and heightened awareness.