Proximity and the Management of Innovation

Chloe Kim Glaeser (), Stephen Glaeser () and Eva Labro ()
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Chloe Kim Glaeser: Operations Area, Kenan Flagler Business School, University of North Carolina at Chapel Hill, Chapel Hill, North Carolina 27599
Stephen Glaeser: Accounting Area, Kenan Flagler Business School, University of North Carolina at Chapel Hill, Chapel Hill, North Carolina 27599
Eva Labro: Accounting Area, Kenan Flagler Business School, University of North Carolina at Chapel Hill, Chapel Hill, North Carolina 27599

Management Science, 2023, vol. 69, issue 5, 3080-3099

Abstract: We study the effect of proximity to corporate headquarters on the productivity of inventors and research and development (R&D) facilities. Distant inventors and R&D facilities are less productive, and plausibly exogenous reductions in the travel time from these inventors or facilities to headquarters increase their productivity and creativity. We hypothesize that these improvements in the management of innovation production occur because proximity improves monitoring, managerial ability to provide direction, relationship building that supports creativity, and information exchange, including advice from headquarters. Consequently, our results suggest that proximity can help managers balance both exploration and exploitation when overseeing innovation. Naturally, these results then beg the question of why firms do not locate all inventors and R&D facilities in close proximity to headquarters. We find that distant inventors and R&D facilities are located in areas with better general economic indicators, and especially more favorable tax rates, than headquarters, suggesting firms balance these benefits against the benefits of proximity when locating innovation production.

Keywords: proximity; location; innovation; inventors; management; empirical operations; creativity; taxation (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:69:y:2023:i:5:p:3080-3099

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