Recombinant innovation, the combination of existing ideas, is important for technological progress; we want to understand how important market frictions are in stifling the transmission of ideas from one firm to another. Although the theoretical literature emphasizes the importance of these frictions, direct empirical evidence on them is limited. We use comprehensive data on patent applications 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 7%, and across technologies of around 20%. These result point towards substantial imperfections in the market for technology.
Figure 1: Cumulative density of time to first citation in days if cited within 5 years.
Authors
CPP Co-Director, IFS Research Director
Rachel is Research Director and Professor at the University of Manchester. She was made a Dame for services to economic policy and education in 2021.
Research Fellow Columbia University
Sokbae is an IFS Research Fellow and a Professor at Columbia University, with an interest in Econometrics, Applied Microeconomics and Statistics.
Bas Straathof
Journal article details
- DOI
- 10.1016/j.ijindorg.2016.10.005
- Publisher
- Elsevier
- JEL
- F23; O32; O33
- Issue
- Volume 50, January 2017, pages 34-56
Suggested citation
R, Griffith and S, Lee and B, Straathof. (2017). 'Recombinant innovation and the boundaries of the firm' 50(2017), pp.34–56.
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