Disregarding the Shoulders of Giants: Inferences from Innovation Research
David M. Reeb, and Wanli Zhao, 2021. Disregarding the Shoulders of Giants: Inferences from Innovation Research, forthcoming, Review of Corporate Finance Studies.
56 Pages Posted: 21 May 2018 Last revised: 11 Oct 2021
Date Written: October 5, 2021
Studies proposing new determinants of corporate innovation include previously identified factors in an ad hoc manner. We find that only a sparse set of recently proposed innovation determinants provide material, independent information about patents and citations. We document that inferences in recent empirical studies often change when we include previously discovered innovation determinants. Commonly used econometric methods, including fixed effects and plausible shocks, do not always mitigate the need to condition on previously identified innovation determinants. Rather than randomly selecting a subset of control variables from prior studies, our analysis offers researchers a framework to consider previously proposed variables.
Keywords: variable selection, machine learning, lasso, innovation, patents, citations
JEL Classification: O30, G30, G32, O34
Suggested Citation: Suggested Citation