When Does Distributed Innovation Activity Make Sense? Location, Decentralization, and Innovation Success

Aija Leiponen and Constance E. Helfat

No 1063, Discussion Papers from The Research Institute of the Finnish Economy

Abstract: Companies face an expanding set of choices about where to locate their innovation activity, both within their home countries and abroad. This location choice also requires firms to make a simultaneous choice about the organizational structure of innovation activity : almost by definition, multiple locations per firm imply some degree of decentralization. Using firm-level data on innovation output and the location of research and development (R&D) activity, we shed new light on the question of whether firms that have multiple locations also have greater innovation success. Our results indicate that, on average, having distributed R&D activity is beneficial in terms of the extent and breadth of innovation success, and the effect is strongly related to the knowledge sourcing strategies that firms employ. These results are consistent with the interpreta-tion that R&D location decisions are driven by the desire of firms to access a broad set of external sources of knowledge for innovation activities. We also find that the benefits of multiple R&D lo-cations do not apply to novel (new-to-the-market) innovations. Our results suggest that when analyzing technological innovation, it is important to distinguish between novel and imitative innova-tions, since their determinants may differ.

Keywords: research and development; innovation; organisation; decentralisation; knowledge sourcing (search for similar items in EconPapers)
JEL-codes: L22 O32 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2006
New Economics Papers: this item is included in nep-cse, nep-geo, nep-ino, nep-ipr, nep-pr~, nep-knm and nep-mic
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Citations: View citations in EconPapers (1)

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