Innovation is becoming more open, often involving multiple organizations in a division of innovative labor (DoIL). The division of innovative labor in the economy is conceived of as the distribution across firms and other organizations of the following steps in the innovation process: 1) research/idea generation; 2) development; and 3) commercialization. Despite its importance, there is little broad-based, systematic evidence on the extent or nature of the DoIL, nor on its impact on firm performance or the rate of technical advance. The project collects the first systematic data on the DoIL for the United States by surveying over 20,000 firms in manufacturing and selected service industries,. The collected data quantifies key features of the DoIL. It also provides the basis for developing and empirically testing models of the DoIL and its effects on innovative performance. The project addresses a number of important questions, such as the extent to which startups, as compared to established firms, are generators of new ideas, the importance of universities as sources of industrial innovation, and the extent to which firms' use of external knowledge inputs increases their innovative performance. Finally, the research advances the economics of innovation by generating formal models that capture the DoIL and testing those models empirically.
Broader Impacts: This project is the first national effort to collect data on innovative activity generally, going beyond R&D and patenting. It is an important addition to the data infrastructure required for a science of science and innovation policy. By generating new data on innovative activity, creating new metrics, and developing new models of the innovation process, the research also informs both public policy and firm strategy. The research should contribute to deliberations on intellectual property policy and policies on standards and cooperative research and development agreements that potentially affect the growth of technology markets and the DoIL. By highlighting the role of small firms, startups, and universities in the innovation process, the findings should also help inform federal support to university research and new firm formation. The project findings should also contribute to the federal government's ongoing efforts to improve its collection of data on industrial R&D and innovation. The research also contributes to the management of innovation by highlighting the returns to extramural knowledge sourcing, or strategic alliances formed to develop or commercialize new technologies.
Recent accounts suggest the development and commercialization of invention has become more "open." Greater division of labor between inventors and innovators (i.e., firms that introduce new or significantly improved products to the market) can enhance social welfare through gains from trade and greater economies of specialization. Moreover, extensive reliance upon outside sources for invention also suggests that understanding the factors that condition the extramural supply of inventions to innovators is crucial to understanding the determinants of the rate and direction of innovative activity. This research reports on a recent survey of over 6000 American manufacturing and service sector firms on the extent to which innovators rely upon external sources of invention. The results indicate that, between 2007 and 2009, 18% of manufacturing firms had innovated – meaning had introduced a product that was new to the market. Of these, 49% report that their most important new product had originated from an outside source, notably customers, suppliers and technology specialists (i.e., independent inventors, universities or R&D contract firms). We also find that the most important channel linking extramural invention to innovating firms is a cooperative R&D effort, with informal ties, service contracts, licensing, and acquisitions also playing important roles. We estimate the contribution of each source to innovation in the US economy. Although customers are the most frequent outside source, inventions acquired from customers tend to be economically less significant than those from technology specialists. As a group, external sources of invention make a significant contribution to the overall rate of innovation in the economy. Indeed, a multinomial logit model, albeit qualified by a number of strong assumptions (e.g., independence of irrelevant alternatives), implies that, were the outside availability of innovation to be removed, the percentage of innovating firms in the U.S. manufacturing sector would drop from 18% to 10%. Our findings show the division of innovative labor involves multiple types of actors and institutional arrangements linking them. Accordingly, innovation policies, both public and private, should address innovation as the outcome of a system of relationships and thus pay careful attention to the efficiency of the mechanisms and institutions, such as patent policy, that support the division of labor between inventors and innovators.
