Institutions and the Direction of Innovative Search: Change and Persistence Between and Within Countries
39 Pages Posted: 18 Jul 2015
Date Written: July 15, 2015
This paper examines the impact of the macro-institutional environment on exploitative-explorative innovation. Building on organizational learning, institutional economics, and innovation studies, we identify country-level institutions that might foster or hinder firms’ incentives and ability to explore or exploit. We test our conjectures by analyzing all patented firm innovations in 22 countries over the 1985-2008 timeframe. Empirical tests demonstrate the role of national institutions in explaining cross-country differences in the level of exploitative and exploratory innovation. The results also suggest that firms’ incentives to explore are influenced by changes in the institutions that regulate the ecology of competition in an economy.
Keywords: Exploration versus exploitation, Innovation and R&D, Patents, Institutional environment, Panel data
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