Human Capital, Firm Capabilities, and Innovation

46 Pages Posted: 7 Dec 2017

See all articles by Ajay Bhaskarabhatla

Ajay Bhaskarabhatla

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); Erasmus Research Institute of Management

Deepak Hegde

New York University (NYU) - Leonard N. Stern School of Business

Thomas Peeters

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); University of Antwerp - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: December 3, 2017

Abstract

Are differences in inventor productivity due to differences in inventors’ skills or differences in the capabilities of the firms they work for? We analyze a 37-year panel that tracks the patenting of U.S. inventors and find strong evidence for serial correlation in inventors’ productivity. We apply an econometric technique developed by Abowd, Kramarz, and Margolis (1999) to decompose the contributions of inventors’ human capital and firm capabilities for productivity. Our estimates suggest human capital is 4-5 times more important than firm capabilities for explaining the variance in inventor productivity. High human capital inventors work for firms that have (i) other high human capital inventors, (ii) superior financial performance, and (iii) weak firm-specific invention capabilities. On the margins, managers should emphasize selecting talent rather than training workers to enhance innovation performance.

Keywords: Human Capital, Capabilities, Innovation, Matching, Competitive Advantage

JEL Classification: O30, O31, O32, J24

Suggested Citation

Bhaskarabhatla, Ajay and Hegde, Deepak and Peeters, Thomas, Human Capital, Firm Capabilities, and Innovation (December 3, 2017). Available at SSRN: https://ssrn.com/abstract=3081933 or http://dx.doi.org/10.2139/ssrn.3081933

Ajay Bhaskarabhatla

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands
+31 10 408 1004 (Phone)

HOME PAGE: http://people.few.eur.nl/bhaskarabhatla/

Erasmus Research Institute of Management ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands
+31 10 408 1004 (Phone)

HOME PAGE: http://www.erim.eur.nl/people/ajay-bhaskarabhatla/

Deepak Hegde (Contact Author)

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

Thomas Peeters

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

University of Antwerp - Department of Economics ( email )

Prinsstraat 13
Antwerp, B-2000
Belgium

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