Motivation and Sorting in Open Source Software Innovation

This paper studies the role of intrinsic motivation, reputation, and reciprocity in driving open source software innovation. Unlike previous literature based on survey data, we exploit the observed pattern of contributions - the .revealed preference. of developers - to infer the underlying incentives driving the decision to contribute source code. Using detailed information on code contributions and project membership, we classify software developers into distinct types and study how contributions from each developer type vary according to the open source license type and other project characteristics. We find that developers strongly sort by license type, project size, and corporate sponsorship, and that reciprocity is important only for a small subset of projects. We also show that contributions have a substantial impact on the performance of open source projects.open source software, innovation, incentives, intrinsic motivation, motivated agents, reputation, reciprocity

Innovation in Business Groups

Using novel data on European firms, this paper examines the effect of business group affiliation on innovation. We find that business groups foster the scale and novelty of corporate innovation. Group affiliation is particularly important in industries that rely more on external finance and have a higher degree of information asymmetry. We also find that the innovation of affiliates is less sensitive to operating cash flows. We interpret our results as supporting the 'bright side' of business group internal capital markets and explain how legal boundaries between group affiliates mitigate the inefficiencies found in internal capital markets of US conglomerates.business groups, innovation, internal capital markets

Spreading the Word: Geography, Policy and University Knowledge Diffusion

Using new data on citations to university patents and scientific publications, and measures of distance based on Google maps, we study how geography affects university knowledge diffusion. We show that knowledge flows from patents are localized in two respects: they decline sharply with distance up to about 100 miles, and they are strongly constrained by state borders, controlling for distance. While distance also constrains knowledge spillovers from publications, the state border does not. We investigate how the strength of the state border effect varies with university and state characteristics. It is larger for patents from public, as compared to private, universities and this is partly explained by the local development policies of universities. The border effect is larger in states with stronger non-compete laws that affect intra-state labor mobility, and those with greater reliance on in-state educated scientists and engineers. We confirm the impact of non-compete statutes by studying a policy reform in Michigan that introduced such restrictions.knowledge spillovers, diffusion, geography, university technology transfer, patents, scientific publications

The Impact of Private Ownership, Incentives and Local Development Objectives on University Technology Transfer Performance

We study the impact of private ownership, incentive pay and local development objectives on university licensing performance. We develop and test a simple contracting model of technology licensing offices, using new survey information together with panel data on U.S. universities for 1995-99. We find that private universities are much more likely to adopt incentive pay than public ones, but ownership does not affect licensing performance conditional on the use of incentive pay. Adopting incentive pay is associated with about 30-40 percent more income per license. Universities with strong local development objectives generate about 30 percent less income per license, but are more likely to license to local (in-state) startup companies. In addition, we show that government constraints on university licensing activity are .costly. in terms of foregone license income and the creation of start-up companies. These results are robust to controls for observed and unobserved heterogeneity.incentives, performance pay, universities, technology transfer, licensing, local development

Harnessing Success: Determinants of UniversityTechnology Licensing Performance

We study the impact of incentive pay, local development objectives and governmentconstraints on university licensing performance. We develop and test a simple contractingmodel of technology licensing offices, using new survey information together with paneldata on U.S. universities for 1995-99. We find that private universities are much morelikely to adopt incentive pay than public ones, but ownership does not affect licensingperformance conditional on the use of incentive pay. Adopting incentive pay is associatedwith about 30-40 percent more income per license. Universities with strong localdevelopment objectives generate about 30 percent less income per license, but are morelikely to license to local (in-state) startup companies. Stronger government constraints are'costly' in terms of foregone license income and startup activity. These results are robustto controls for observed and unobserved heterogeneity.Keywords: incentives,incentives,

Knowledge Flow and Sequential Innovation: Implications for Technology Diffusion, R&D and Market Value

It is shown that spillovers can enhance private returns to innovation if they feed back into the dynamic research of the original inventor (Internalized spillovers), but will always reduce private returns, if the original inventor does not benefit from the advancements other inventors build into the "spilled" knowledge (Externalized spillovers). I empirically identify unique patterns of knowledge flows (based on patent citations), which provide information about whether "spilled" knowledge is reabsorbed by its inventor. A simple model of sequential innovation with dynamic spillovers is developed, which predicts that market value and R&D expenditures should rise with Internalized spillovers and fall with Externalized spillovers. These predications are confirmed using panel data on U.S. firms between 1981 and 2001. To the extent that firms internalize some of the spillovers they create, the classical underinvestment problem in R&D will be mitigated and the central role of spillovers in promoting economic growth will be enhanced.market value, patents, R&D and spillovers

Basic Research and Sequential Innovation

The commercial value of basic knowledge depends on the arrival of follow-up developments mostly from outside the boundaries of the inventing firm. Private returns would depend on the extent the inventing firm internalizes these follow-up developments. Such internalization is less likely to occur as knowledge becomes more general. This motivates the historical concern of insufficient private incentive for basic research. The present paper develops a novel empirical methodology of identifying unique patterns of knowledge flows (based on patent citations), which provide information about whether 'spilled' knowledge is reabsorbed by its inventor. Using comprehensive data on the largest 500 inventing firms in the US the classical problem of underinvestment in basic research is confirmed: spillovers of more general knowledge (and in this respect, more basic) are less likely to feed back to the inventing firm. This translates to lower private returns, as indicated by the effect of the R&D stock of the firm on its market value.basic knowledge, spillovers, patents and citations

Innovation and firm value: An investigation of the changing role of patents, 1985-2007

This paper examines how the relationship between firm value and patent-based indicators of inventive activity has changed over time. We use data from more than 33,000 mergers and acquisitions deals between 1985 and 2007, and distinguish between American (USPTO) and European (EPO) patents. Our results indicate that over time EPO patents have become the dominant indicator of innovative activity, while USPTO patents have no effect on firm value near the end of the sample period. The results are robust to controlling for citations and are especially strong for small firms, for firms operating in the drug and chemical industries, and when target and acquiring firms operate in different industries or countrie

Diffusion of technology discoveries, the incentive to innovate and strategic behaviour theory and empirical evidence

This thesis introduces dynamic considerations and shows that knowledge spillovers (hereafter, spillovers) can also enhance the private returns to innovation (thus, reduce private obsolescence), should they feed back into the dynamic research of the original inventor. However, spillovers will always reduce private returns (thus, intensify private obsolescence) if the original inventor does not technologically benefit from the advancements other inventors build into its spilled knowledge. The contribution of this thesis broadens the concept of private returns to innovation, by distinguishing between static and dynamic returns. Static returns are defined as the stream of profits directly associated with a single invention, whereas dynamic returns also consider the expected stream of profits the firm can receive from the subsequent developments of its knowledge. We develop a conceptual framework as well as an empirical methodology that allow us to identify unique patterns of knowledge diffusion, which are defined as lines of research (they are empirically identified as unique sequences of patent citations). We classify the lines of research as two types, based on the feedback they yield to their inventors. A line of research is defined as Internalized, if knowledge returns to the boundaries of its inventor, after having been advanced by other firms, whereas a line of research is defined as Externalized, if knowledge does not return to the boundaries of its inventor, after having been advanced by other firms. We find a substantial firm-level variation in the ability to reabsorb spilled knowledge, even within four-digit industries. This variation translates to differential private returns to innovation, where firms that enjoy a more Internalized and less Externalized pattern of diffusion capture higher private returns, as indicated by the effect of their R&D on their market value. Moreover, we estimate a R&D equation and find preliminary evidence suggesting that firms adjust their R&D expenditures according to their ability to reabsorb their spilled knowledge. Firms that enjoy a more Internalized and less Externalized pattern of diffusion on average invest more in R&D. We show that firms are able to internalise dynamically some of their knowledge that spills to other firms. To the extent that such internalisation occurs, the underinvestment problem in R&D will be mitigated

Naming a firm after its owner is risky, but can pay off handsomely

It communicates confidence and can translate into greater success than that of other firms, write Aaron Chatterji, Sharon Belenzon and Brendan Dale