Incremental versus Breakthrough Innovation: The Role of Technology Spillovers
51 Pages Posted: 2 Oct 2017 Last revised: 5 Jun 2018
Date Written: May 5, 2018
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: Suggested Citation