Firm Scope and Spillovers from New Product Innovation: Evidence from Medical Devices

Matthew Grennan, Charu Gupta, Mara Lederman

NBER Working Paper No. 25183
Issued in October 2018
NBER Program(s):Health Care Program, Industrial Organization Program, Productivity, Innovation, and Entrepreneurship Program

When firms span related product categories, spillovers across categories become central to firm strategy and industrial policy, due to their potential to foreclose competition and affect innovation incentives. We exploit major new product innovations in one medical device category, and detailed sales data across related categories, to develop a causal research design for spillovers at the customer level. We find evidence of spillovers, primarily associated with complementarities in usage. These spillovers imply large benefits to multi- vs. single-category firms, accounting for nearly one quarter of sales in the complimentary category (equivalent to four percent of revenue in the focal category).

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Acknowledgments

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Document Object Identifier (DOI): 10.3386/w25183