Incremental versus Breakthrough Innovation: The Role of Technology Spillovers

51 Pages Posted: 2 Oct 2017 Last revised: 5 Jun 2018

See all articles by Seong K. Byun

Seong K. Byun

Virginia Commonwealth University (VCU) - Department of Finance, Insurance & Real Estate

Jong-Min Oh

University of Central Florida (UCF) - Department of Finance

Han Xia

University of Texas at Dallas - Naveen Jindal School of Management

Date Written: May 5, 2018

Abstract

We show that although technology spillovers increase firms’ overall innovation outputs, they shift the direction of corporate research and development (R&D) by promoting innovation based on the exploitation of existing knowledge, while deterring innovation that explores new areas and breaks new ground. Accordingly, firms facing large technology spillovers attain fewer superstar inventors among their human capital – who are arguably the key drivers of breakthrough technology advancement. These firms eventually create products that are less distinguishable from others, and become less motivated to engage in acquisitions in the search of innovation.

Keywords: Technology spillovers, innovation strategies, research direction, human capital accumulation, product market outcomes, M&A

JEL Classification: G30; L25; M21

Suggested Citation

Byun, Seong K. and Oh, Jong-Min and Xia, Han, Incremental versus Breakthrough Innovation: The Role of Technology Spillovers (May 5, 2018). Available at SSRN: https://ssrn.com/abstract=3045464 or http://dx.doi.org/10.2139/ssrn.3045464

Seong K. Byun

Virginia Commonwealth University (VCU) - Department of Finance, Insurance & Real Estate ( email )

Richmond, VA 23284
United States

Jong-Min Oh

University of Central Florida (UCF) - Department of Finance ( email )

College of Business Administration
P.O. Box 161400
Orlando, FL 32816
United States

Han Xia (Contact Author)

University of Texas at Dallas - Naveen Jindal School of Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

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