Fast Friends: The Impact of Short-Term Visits on Firms' Invention Outcomes

Abstract

We examine how employees’ short-term visits between Research and Development (R&D) centers across different countries can enhance a firm’s invention outcomes through enhancing intra-organizational knowledge flows and mutual trust between scientists. We utilize the staggered introduction of the US visa waiver program (VWP) to 41 countries in 1988–2023, which substantially increased short-term visits to the United States. Following the introduction of the VWP, global pharmaceutical companies with R&D centers in VWP countries showed a significant increase in invention quantity and scope compared to those without R&D centers in VWP countries. Notably, we find that the benefits of short-term visits are greater when there is an intermediate knowledge distance between firms’ R&D centers in the United States and VWP countries. If R&D centers have similar knowledge bases, efficient knowledge flows can occur even without visits. For centers with very different knowledge bases, short-term visits do not provide enough time for sufficient knowledge flows. Benefits of short-term visits are also magnified when the cultural distance is greater between their R&D centers. Our findings highlight that even short-term face-to-face interactions can enhance the sharing of tacit knowledge and subsequent invention, thereby offering important managerial and policy implications.

Keywords: Technology and Innovation Management, Geography of Innovation, International Management, Knowledge-based View

JEL Classification: J61, O15, O31, O32, F23