YOUNG, RESTLESS AND CREATIVE: OPENNESS TO DISRUPTION AND CREATIVE INNOVATIONS

Transcription

1 YOUNG, RESTLESS AND CREATIVE: OPENNESS TO DISRUPTION AND CREATIVE INNOVATIONS Daron Acemoglu, Ufuk Akcigit, Murat Alp Celik NBER WORKING PAPER February 2014 Daron Acemoglu, Ufuk Akcigit, Murat Alp Celik NBER WORKING PAPER 1/18

2 Introduction This paper investigates the impact of economic and social incentives on creative innovations. only a small fraction of patents account for the bulk of the value created (e.g., Hall, Jaffe and Trajtenberg, 2001). Joseph Schumpeter (1934) economic rewards the ability and desire of potential innovators and entrepreneurs to significantly deviate from existing technologies, practices and rules of organization and society and engage in disruptive innovations. Daron Acemoglu, Ufuk Akcigit, Murat Alp Celik NBER WORKING PAPER 2/18

3 Introduction Openness to disruption cross-country level individualism uncertainty avoidance the average age of (top) managers firm-level and patent-level the average age of (top) managers Daron Acemoglu, Ufuk Akcigit, Murat Alp Celik NBER WORKING PAPER 3/18

4 Related literatures The impact of cultural factors and practices on long-run economic development Tabellini (2008a,b), Fernandez and Fogli (2009), Guiso, Sapienza and Zingales (2010), Alesina, Giuliano and Nunn (2011), Gorodnichenko and Roland (2012),Fogli and Veldkamp (2012) Age and creativity Galenson and Weinberg (1999, 2001), Weinberg and Galenson (2005), Jones and Weinberg (2011) and Jones (2010) Innovation and firm dynamics Acs and Audretsch (1987, 1988), Kortum and Lerner (2000), Baumol (2009), Akcigit and Kerr(2010), and Acemoglu et al. (2013),Trajtenberg (1990), Harhoff et al (1999), Shane and Klock (1997), Sampat and Ziedonis (2004), Abrams et al. (2013) Innovation literature investigating disruptive innovations Christensens seminal The Innovators Dilemma (1997), Henderson (2006), Adner and Zemsky (2005), King and Tucci (2002) Daron Acemoglu, Ufuk Akcigit, Murat Alp Celik NBER WORKING PAPER 4/18

5 The model Firm innovation strategies an incremental innovation by building on their existing leading-edge products a radical innovation by combining diverse ideas to generate an improvement in a new area Daron Acemoglu, Ufuk Akcigit, Murat Alp Celik NBER WORKING PAPER 5/18

6 The model The main proposition Young managers will be hired on product lines for which firms are pursuing radical innovations, which are those operated by high-type firms. Old managers will be hired by firms that undertake incremental innovations. The paper doesnt interpret the correlations as causal effects. Daron Acemoglu, Ufuk Akcigit, Murat Alp Celik NBER WORKING PAPER 6/18

7 Data and variable construction USPTO Utility Patents Grant Data(PDP) Compustat North American Fundamentals Executive Compensation Data The Careers and Co-Authorship Networks of U.S. Patent Inventors National Culture Dimensions Cross-Country Data on Manager Age Others: Barro-Lee dataset, World Banks World Development Indicators dataset Daron Acemoglu, Ufuk Akcigit, Murat Alp Celik NBER WORKING PAPER 7/18

8 Data and variable construction Innovation Quality: the number of citations a patent received as of 2006 truncation correction weights devised by Hall, Jaffe, and Trajtenberg (2001) a five-year window Superstar Fraction: fraction of patents with superstar inventors in that year Daron Acemoglu, Ufuk Akcigit, Murat Alp Celik NBER WORKING PAPER 8/18

9 s ij denote the share of citations that patent j receives from patents in technology class i. Daron Acemoglu, Ufuk Akcigit, Murat Alp Celik NBER WORKING PAPER 9/18 Data and variable construction Tail Innovations:the fraction of patents of a firm or country that receive more than a certain number of citations Tail ft (p) = s ft (p) s ft (0.50), s ft (p) denote the number of the patents of a firm(country) that are above the p th percentile of the year t distribution according to citations. Generality and Originality:measures the dispersion of the citations received by a patent in terms of the technology classes of citing patents. generality j = 1 i I s 2 ij.

10 Cross-Country Correlations y c = αi c + X cβ + ε c, Daron Acemoglu, Ufuk Akcigit, Murat Alp Celik NBER WORKING PAPER 10/18

11 Conclusion: a positive association between openness to disruption and creative innovation at cross-country level. Daron Acemoglu, Ufuk Akcigit, Murat Alp Celik NBER WORKING PAPER 11/18

12 Firm-Level Results y f = αm f + X f β + δ i(f ) + ε f, Daron Acemoglu, Ufuk Akcigit, Murat Alp Celik NBER WORKING PAPER 12/18

13 Conclusion: a positive association between openness to disruption and creative innovation at firm level. Daron Acemoglu, Ufuk Akcigit, Murat Alp Celik NBER WORKING PAPER 13/18

14 Patent level Results y ift = φi ift + αm ft + X iftβ + δ f + γ i + d t + ε ift. Daron Acemoglu, Ufuk Akcigit, Murat Alp Celik NBER WORKING PAPER 14/18

15 Conclusion: Manager/CEO age has an effect on the creativity of innovations that goes beyond the sorting of managers to firms. Daron Acemoglu, Ufuk Akcigit, Murat Alp Celik NBER WORKING PAPER 15/18

16 Stock of Knowledge, Opportunity Cost and Creativity of Innovations Indication: average manager age matters more for the creativity of innovations for companies with a significant number of patents and less for companies with high sales. Daron Acemoglu, Ufuk Akcigit, Murat Alp Celik NBER WORKING PAPER 16/18

17 Conclusion Openness to disruption may be a key determinant of creative innovations, and likewise, resistance to such disruptive behavior may hold back some of the most creative innovative activities. A first step in the study of the impact of various social and economic incentives on creative activities and, in particular, on creative innovations. Daron Acemoglu, Ufuk Akcigit, Murat Alp Celik NBER WORKING PAPER 17/18

18 Conclusion Future research direction the causal effect of various other firm-level or cross-country characteristics on the creativity of innovations: geography, religion, democracy,immigrant what types of firm organizations encourage creativity and lead to more creative innovations the interplay between institutional and society-level factors and the internal organization of firms Daron Acemoglu, Ufuk Akcigit, Murat Alp Celik NBER WORKING PAPER 18/18