Recombinant innovation and the boundaries of the firm

Recombinant innovation and the boundaries of the firm
Document type
Working Paper
Griffith, Rachel; Sokbae, Lee; Straathof, Bas
Institute for Fiscal Studies
Date of publication
1 August 2014
cemmap working paper CWP40/14
Trends: economic, social and technology trends affecting business
Business and management
Material type

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There is considerable interest in understanding how important market frictions are in stiffing the transmission of ideas from one firm to another. Although the theoretical literature emphasises the importance of these frictions, direct empirical evidence on them is limited. This working paper uses comprehensive patent data from the European Patent Office and a multiple spells duration model to provide estimates that suggest that they are substantial. It is around 30% more costly to successfully discover and utilize new ideas created in another firm than in your own. This compares to the increased costs of accessing new ideas across national borders of around 5%, and across technologies of around 20%. These results point towards substantial imperfections in the market for technology.

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