Get with the Program: Software-Driven Innovation in Traditional Manufacturing

38 Pages Posted: 7 Dec 2015 Last revised: 9 Jun 2023

See all articles by Lee Branstetter

Lee Branstetter

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management; National Bureau of Economic Research (NBER)

Matej Drev

Georgia Institute of Technology

Namho Kwon

Carnegie Mellon University

Date Written: November 2015

Abstract

This paper documents the increasing importance of software for successful innovation in manufacturing sectors well beyond the traditional definition of electronics and information technology. Using panel data for 229 publicly listed firms from 18 countries across four manufacturing industries over the period 1981-2005, we find significant variation across firms in the software intensity of their innovative activity. Firms that exhibit a higher level of software intensity generate more patents per R&D dollar, and their investment in R&D is more highly valued by equity markets. We present evidence that geographic differences in the abundance of skilled software labor are an important factor in determining sample firms’ software intensity and performance.

Suggested Citation

Branstetter, Lee and Drev, Matej and Kwon, Namho, Get with the Program: Software-Driven Innovation in Traditional Manufacturing (November 2015). NBER Working Paper No. w21752, Available at SSRN: https://ssrn.com/abstract=2699996

Lee Branstetter (Contact Author)

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management ( email )

Pittsburgh, PA 15213-3890
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Matej Drev

Georgia Institute of Technology ( email )

Atlanta, GA 30332
United States

Namho Kwon

Carnegie Mellon University

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