Killing the Golden Goose? The Decline of Science in Corporate R&D

Abstract

and the CES conference for helpful comments and feedback. We thank Luis Rios for excellent research assistance. Arora and Belenzon acknowledge research support from the Fuqua School of Business, Duke University. The customary disclaimers apply. Belenzon acknowledges support from the Center for Economic Performance at LSE for help with data collection. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Exploring and Yet Failing Less: learning from past and current exploration in R&D

“…Although firms tend to prefer development-based exploitation to research-based exploration (Arora et al, 2015), we find that exploration offers two sources of learning that have the potential to reduce the risk of a failed innovation project. These sources emerge after a certain level of exploration effort and when current efforts are combined with accumulated experience in exploration activities.…”

“…Adaptive learning, in which firms prioritise effectiveness and attention to innovation in the familiar territory of current experience, limits the opportunities for learning (Gupta et al, 2006;Fang et al, 2010). This is because firms tend to focus on reliable and predictable performance at the expense of the search for new ideas or new markets, which has less certain outcomes, longer time horizons and more diffuse effects (March, 1991;Arora et al, 2015).…”

Changing of the Guard: Structural Change and Corporate Science in the Semiconductor Industry

“…These results are in line with the findings by Simeth and Cincera (2015), who found positive effects for high-tech Compustat firms, but not for the ICT sector. Arora et al (2015) find a positive relationship between publication stock and market value, which however decreases over time.…”

“…By focusing on a set of publicly listed firms from high-tech sectors, Simeth and Cincera (2015) estimated that corporate engagement in scientific research is positively associated with the valuation of intangible assets of firms, confirming that the benefits accruing from scientific research outweigh the potential costs. However, concerns exist that private corporations have been cutting back on science the last decades due to competitive pressures (Arora et al 2015). The authors show that the number of publications in scientific journals by publicly listed US firms has decreased over time, advancing that globalization and a focus on core activities have led firms to value the returns on the investments in science, rather than investing in scientific capabilities.…”

“…Particularly small or young firms (in our setting, fabless firms with business models based on the continuous amelioration of system-level knowledge), appear to be better endowed to profit from (basic) science (Arora et al 2015;Mowery 2009: Tushman andAnderson 1986). The results are also in line with the idea that entrant firms, fabless firms in our sample, are better able to adapt to radical technological change in the market than incumbent firms which "fall prey to inertia and complacency" (Henderson 1993).…”