Innovation Strategy of Private Firms
54 Pages Posted: 12 Mar 2014 Last revised: 16 Aug 2017
Date Written: May 10, 2017
We compare innovation strategies of public and private firms based on a large sample over the period 1997-2008. We find that public firms’ patents rely more on existing knowledge, are more exploitative, and are less likely in new technology classes, while private firms’ patents are broader in scope and more exploratory. We investigate whether these strategies are due to differences in firm information environments, CEO risk preferences, firm life cycles, corporate acquisition policies, or investment horizons between these two groups of firms. Our evidence suggests that the shorter investment horizon associated with public equity markets is a key explanatory factor.
Keywords: innovation strategy; exploratory innovation; exploitative innovation; investment horizons; private firms; public firms
JEL Classification: G32, O32
Suggested Citation: Suggested Citation