Not Invented Here? Innovation in Company Towns

40 Pages Posted: 3 Nov 2009 Last revised: 29 Oct 2014

See all articles by Ajay Agrawal

Ajay Agrawal

University of Toronto - Rotman School of Management; National Bureau of Economic Research (NBER)

Iain M. Cockburn

Boston University Questrom School of Business; National Bureau of Economic Research (NBER)

Carlos Rosell

University of Toronto - Department of Economics

Date Written: October 2009

Abstract

We examine variation in the concentration of inventive activity across 72 of North America's most highly innovative locations. In 12 of these areas, innovation is particularly concentrated in a single, large firm; we refer to such locations as "company towns.'' We find that inventors employed by large firms in these locations tend to draw disproportionately from their firm's own prior inventions (as measured by citations to their own prior patents) relative to what would be expected given the underlying distribution of innovative activity across all inventing firms in a particular technology field. Furthermore, we find such inventors are more likely to build upon the same prior inventions year after year. However, smaller firms in company towns do not exhibit this myopic behavior; they draw upon prior inventions as broadly as their small-firm counterparts in more diverse locations. In addition, we find that inventions by large firms in company towns have less impact than those produced elsewhere, although the difference is modest, and that the impact is disproportionately appropriated by the inventing firms themselves. Finally, the geographic scope of impact realized by company town inventions is narrower, whether produced by large or small firms.

Suggested Citation

Agrawal, Ajay and Cockburn, Iain M. and Rosell, Carlos, Not Invented Here? Innovation in Company Towns (October 2009). NBER Working Paper No. w15437. Available at SSRN: https://ssrn.com/abstract=1498919

Ajay Agrawal (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Iain M. Cockburn

Boston University Questrom School of Business ( email )

595 Commonwealth Avenue
Boston, MA MA 02215
United States
617-353-3775 (Phone)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Carlos Rosell

University of Toronto - Department of Economics ( email )

150 St. George Street
Toronto, Ontario M5S 3G7
Canada

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