PhD Seminar Series: To Make or To Buy? Scientific Capabilities and Innovation Strategy under Demand Pressure

To Make or To Buy? Scientific Capabilities and Innovation Strategy under Demand Pressure

Speaker: Rujuta Bhagwat

Abstract: Science-grounded innovation commands a higher private value premium and greater technological impact, yet firms differ fundamentally in their capacity to engage with science, both in producing it internally and absorbing it externally. This paper asks: how does heterogeneity in firms' scientific capabilities shape their innovation strategy when demand for science-intensive innovation increases? Exploiting the EU Emissions Trading Scheme as an increase in the returns to green innovation, I use matched firm-level patent data from 1995 to 2013. I distinguish firms by their scientific engagement: those relying on their own science (Leaders), those absorbing external science (Absorbers), and those with no science engagement (Followers). Leaders are consistent in their green patenting strategies while increasing their acquisition activity; Absorbers as well as Followers increase their patent acquisition. Although all the firms seem to increase their patent acquisition, only Leaders and Absorbers are able to acquire high quality, and Leaders are able to increase their patenting quality. Showing that although demand pressure elicits a response from all firms only science-capable firms can capture the opportunity through high-quality patents.