Business Commons^™

Slack, Location, Diversification, Or R&D Intensity? How The Most (And Least) Innovative Firms Deploy Resources, Jamil Kreugel, Matthew Farrell, Chris H. Willis

College of Business (Strome) Posters

Firms frequently innovate by recombining knowledge components. Through bringing together diverse scientific or technological concepts, firms can reassemble these extant knowledge components into novel and useful innovations. At the same time, many of the mechanisms firms use to recombine knowledge components carry substantial agency costs. When firms conduct research and development, diversify, hold slack resources, or locate near close competitors, they become vulnerable to misappropriation of investor resources due to opportunistic actions by agents. Using patent citation data from semiconductor firms, we study how firms, which consistently produce high-quality innovations, balance the need for knowledge recombination with the need to …