Colleen M. Cunningham
London Business School
London NW1 4SA, United Kingdom
Institutional Affiliation: London Business School
NBER Working Papers and Publications
|September 2018||Inventive Capabilities in the Division of Innovative Labor|
with Ashish Arora, Wesley M. Cohen: w25051
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 inf...