Mitigating Diminishing Returns to R&D: The Role of Information Technology in Innovation

T. Ravichandran (), Shu Han () and Sunil Mithas ()
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T. Ravichandran: Lally School of Management, Rensselaer Polytechnic Institute, Troy, New York 12180
Shu Han: Sy Syms School of Business, Yeshiva University, New York, New York 10033
Sunil Mithas: Robert H. Smith School of Business, University of Maryland, College Park, Maryland 20742

Information Systems Research, 2017, vol. 28, issue 4, 812-827

Abstract: Increasingly, firms across many industries are grappling with the challenge of declining returns to research and development (R&D). In this study, we investigate if and how information technology (IT) can help firms deal with this problem. We theorize that IT systems can help firms to cope with the complexity and inefficiency in managing innovation when R&D investments scale. We explicate the mechanisms through which IT enables firms to cope with the challenges they face when scaling their R&D and we posit that IT will mitigate the diminishing returns to R&D. Using archival data for 161 firms from 1991 to 2003 we find support for our conjecture that IT mitigates the diminishing returns to R&D. The mitigating effect of IT is stronger for firms facing greater complexity in their R&D activities, as measured by inventor intensity and geographical and technological complexity. We interpret and discuss these findings and their practical and theoretical implications.

Keywords: diminishing returns to R&D; business value of IT; R&D productivity; innovation; information technology; patents; R&D (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (20)

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