Skip Navigation

Why Are Some Firms More Innovative? Knowledge Inputs, Knowledge Stocks, and the Role of Global Engagement

By Chiara Criscuolo University College London Jonathan E. Haskel Queen Mary, University of London, Fellow, UK Advanced Institute of Management, and CEPR Matthew J. Slaughter Tuck School of Business at Dartmouth and NBER

Leah Halvorson Email LeahHalvorson

Abstract

Why do some firms create more knowledge than others? This question is typically answered in macro and industrial-organization literatures with reference to a production-function model in which new ideas spring from the interaction of researchers and the existing stock of knowledge. But there is very little empirical evidence on production functions for new ideas. In this paper we estimate knowledge production functions for a cross-section of U.K. firms covering their operations from 1998 through 2000. We focus in particular on the hypothesis from the trade literature that globally engaged firms—either multinationals or exporters—have access to larger knowledge stocks. We find that globally engaged firms do generate more ideas than their purely domestic counterparts. This is not just because they use more researchers. Importantly, it is also because they have access to a larger stock of ideas through two main sources: their upstream and downstream contacts with suppliers and customers, and, for multinationals, their intra-firm worldwide pool of information. Our analysis also yields estimates of key parameters of the knowledge production function, estimates which relate to important macro growth models.

To print this page, select "Print" from the File menu of your browser.