Regional R&D Decentralization and Breakthrough Inventions: A Tale of Two Mechanisms

Abstract

This study explores the relationship between regional R&D decentralization—i.e. the extent to which R&D activity is distributed among distinct firms collocated in the same geographic area and operating in the same technological domain—and the generation of breakthrough inventions. R&D decentralization might affect the chance of generating breakthrough inventions in two distinct ways. On the one hand, firms might just search in parallel along diverse technological paths, which augments the probability that at least some trajectories will lead to extremely valuable inventions. On the other hand, firms pursuing diverse paths might also exchange knowledge with each other, for instance through inventors' mobility, and such recombination possibly leads to a higher likelihood of producing breakthroughs. By assessing (a) the impact of R&D decentralization on the share of breakthrough inventions and (b) how this impact changes according to the rate of inventors' mobility in regions, this paper aims at understanding which mechanism, if any, actually operates.

Keywords::

• regional R&D decentralization
• inventive performance
• invention value distribution

JEL Classification::

• O30
• O31
• R10
• R11

Acknowledgements

I would like to thank the Associate Editor Bart Leten and three anonymous reviewers for their precious suggestions. I am gratefully indebted to my dissertation committee Alfonso Gambardella, Anita McGahan, and Giovanni Valentini for their help and guidance. All remaining errors are mine and follow a random walk.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ Information about the exact timing of both intrastate and interstate bank deregulation can be found in Kerr and Nanda (2009).

² Before logging, 0.1 has been added to those variables that can take a value of 0.