The Rise of Scientific Research in Corporate America

99 Pages Posted: 9 Nov 2021 Last revised: 27 May 2022

See all articles by Ashish Arora

Ashish Arora

Duke University - Fuqua School of Business; National Bureau of Economics Research; Duke Innovation & Entrepreneurship Initiative

Sharon Belenzon

Duke University; NBER; Duke Innovation & Entrepreneurship Initiative

Konstantin Kosenko

Bank of Israel

Jungkyu Suh

Duke University

Yishay Yafeh

Hebrew University of Jerusalem - Jerusalem School of Business Administration; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

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Date Written: September 2021

Abstract

Corporate science in America emerged in the interwar period, as some companies set up state-of-the-art corporate laboratories, hired trained scientists, and embarked upon basic research of the kind we would associate today with academic institutions. Using a newly assembled dataset on U.S. companies between 1900 and 1940 combining information on corporate ownership, organization, research and innovation, we attempt to explain the rise of corporate research. We argue that it was driven by companies trying to take advantage of opportunities for innovation made possible by scientific advances, while facing an underdeveloped academic research system in the United States: In line

with this conjecture, we find that firms close to the technological frontier, operating in sectors where American universities were relatively underdeveloped, were more likely to initiate scientific research in response to rising scientific opportunities. We also find that firms that invested in scientific research were large, diversified and operated in concentrated industries, i.e., were able to capture significant rents from the provision of this public good. Indeed, corporate research was positively correlated with novel and valuable patents, and with high market-to-book ratios.

Keywords: Corporate Science, Innovation, Institutional Voids, US Economic History

JEL Classification: L2, N12, O3, O31, O32

Suggested Citation

Arora, Ashish and Belenzon, Sharon and Kosenko, Konstantin and Suh, Jungkyu and Yafeh, Yishay, The Rise of Scientific Research in Corporate America (September 2021). CEPR Discussion Paper No. DP16592, Available at SSRN: https://ssrn.com/abstract=3960172

Ashish Arora (Contact Author)

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
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National Bureau of Economics Research

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Duke Innovation & Entrepreneurship Initiative ( email )

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Sharon Belenzon

Duke University ( email )

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NBER ( email )

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(1) 617 588 1484 (Phone)

Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
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Konstantin Kosenko

Bank of Israel ( email )

Bank of Israel 1
P.O. Box 780
Jerusalem, 91907
Israel
972-26552628 (Phone)
972-26669628 (Fax)

Jungkyu Suh

Duke University ( email )

Yishay Yafeh

Hebrew University of Jerusalem - Jerusalem School of Business Administration ( email )

Mount Scopus
Jerusalem 91905
Israel
+972 2 588 3081 (Phone)
+972 2 588 1341 (Fax)

HOME PAGE: http://bschool.huji.ac.il/facultye/yafeh/

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
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Belgium

HOME PAGE: http://www.ecgi.org

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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