Standing on the shoulders of science

Joshua L. Krieger, Monika Schnitzer and Martin Watzinger

Strategic Management Journal, 2024, vol. 45, issue 9, 1670-1695

Abstract: Research Summary Today's innovations rely on scientific discoveries of the past, yet only some corporate R&D builds directly on scientific output. In this article, we analyze U.S. patents to investigate how firms generate value by building on prior art “closer” to science. We show that patent value is decreasing in distance‐to‐science. Overall, we find a science premium within firms ranging from 5.0 to 18.3%. If we allow for firm sorting into different modes of R&D based on their relative advantage, that is, when we do not control for firm fixed effects, we find an even larger science premium: patents building directly on scientific publications are 4.0–42.3% more valuable than patents in the same technology that are not directly based on science. Managerial Summary Building on scientific research allows firms to capture significantly more value from their inventions. By analyzing U.S. patents and their linkages to scientific publications, our paper describes the relationship between invention “proximity” to the scientific literature and public firm valuations—as measured in abnormal stock market returns. Our findings indicate that patents building on science are 5.0–18.3% more valuable. If we account for variations in R&D strategies among firms, the premium becomes even larger, ranging from 4.0 to 42.3%. Further, the results show that the value‐enhancing benefits of integrating scientific insights into R&D are greater for firms with more experience building on science. Together, the results underscore the competitive advantages of using science as a foundation for corporate innovation.

Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1002/smj.3598

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:stratm:v:45:y:2024:i:9:p:1670-1695

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0143-2095

Access Statistics for this article

More articles in Strategic Management Journal from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().