The Rise of Scientific Research in Corporate America

Ashish Arora (), Sharon Belenzon (), Konstantin Kosenko (), Jungkyu Suh () and Yishay Yafeh ()
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Ashish Arora: Fuqua School of Business, Duke University, Durham, North Carolina 27708; and NBER, Cambridge, Massachusetts 02138
Sharon Belenzon: Fuqua School of Business, Duke University, Durham, North Carolina 27708; and NBER, Cambridge, Massachusetts 02138
Konstantin Kosenko: Bank of Israel, Jerusalem 9100701, Israel
Jungkyu Suh: Stern School of Business, New York University, New York, New York 10012
Yishay Yafeh: School of Business Administration, The Hebrew University of Jerusalem, Jerusalem 91905, Israel; and CEPR, London EC1V 0DX, United Kingdom; and ECGI, 1000 Brussels, Belgium

Organization Science, 2025, vol. 36, issue 4, 1466-1488

Abstract: It is widely believed that university and corporate research are complementary: companies invest in research in part to develop the capacity to absorb the knowledge emerging from universities. However, as we show in this paper, corporate research in the United States emerged when American universities were behind the world frontier in scientific research. Why, then, did for-profit businesses choose to invest in creating new knowledge, much of which could spill over to rivals, and whose conduct presented many managerial challenges? We argue that corporate research in America arose in the 1920s to compensate for weak university research, not to complement it. Using newly assembled firm-level data from the 1920s and 1930s, we find that companies invested in research because inventions increasingly relied on science but American universities were unable to meet their needs. Large firms close to the technological frontier and operating in concentrated industries were likely to invest in research, especially in scientific disciplines where American universities lagged behind the scientific frontier. Corporate science seems to have paid off, resulting in novel patents and high market valuations for firms engaged in research.

Keywords: innovation; industrial organization; knowledge-based view; organizational structure; competitive strategy; technological change (search for similar items in EconPapers)
Date: 2025
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