Bread Upon the Waters: Corporate Science and the Use of Follow-on Public Research

Revise & Resubmit, Management Science

Abstract

Why do firms produce scientific research that becomes available to the public, including their rivals? An important but hitherto ignored benefit is that it can influence the direction of research conducted by external scientists in ways that benefit the focal firm. I show that external scientists often build upon a firm’s publications, producing follow-on findings, which the firm then incorporates into its own future innovations. To account for the unobserved quality of the science involved, I develop a new instrumental variable that relies on the quasi-random assignment of accepted manuscripts to specific issues of scientific journals. Some publications attract more academic attention simply because they appear alongside contributions from prominent authors in the same journal issue. Using data on scientific publications by public firms between 1990 and 2012, I find that follow-on research not only drives firms’ subsequent investments in science but also improves their patenting outcomes. The benefits are more pronounced for technological leaders, firms with complementary assets, and those operating in emerging research fields. In addition to being a valuable input into the firm’s innovations, follow-on research also helps validate the quality of the firm’s internal science, especially when there is greater uncertainty. My findings contribute to the understanding of why firms participate in public science.

Revise & Resubmit, Management Science

arXiv

Winner of the 2023 Best Paper Award in Memory of Paul A. David, the Workshop on the Organization, Economics and Policy of Scientific Research (Max Planck Institute for Innovation and Competition).

Citation

@misc{Shvadron2024Bread,
  title={Bread Upon the Waters: Corporate Science and the Use of Follow-on Public Research},
  author={Dror Shvadron},
  year={2024},
  eprint={2512.04400},
  archivePrefix={arXiv},
  primaryClass={econ.GN},
  url={https://arxiv.org/abs/2512.04400}
}