Week8_Forman and van Zeebroeck (2012)_Ada

From Wires to Partners: How the Internet Has Fostered R&D Collaborations Within Firms

Motivation:

Historically, collaborative work has been hampered by the existence of significant coordination costs that increase with team size, geographic dispersion, and heterogeneity of team composition. It is widely believed that the adoption of information technology increase the returns to collaborative work. However, little systematic empirical work on the implications of IT investment has been done for industrial research.

Research Question:

The main hypothesis of this paper is that by reducing the coordination costs of collaborative work, investments in IT will be associated with an increase in the likelihood of geographically dispersed, multi-inventor collaborative research teams relative to other types of research teams (including output from single location and lone inventors).

Main Findings:

They find that basic Internet adoption is associated with an increased likelihood of collaborative patents from geographically dispersed teams, which is in contrast with previous finding that IT adoption leads to a disproportionately greater increase in collaborations among researchers who are geographically close to one another. On the contrary, they find no evidence of such a link between Internet adoption and within-location collaborative patents nor single-inventor patents.

Hightlights:

The method they use to address the assumption that Internet adoption is exogenous.

• First, reverse causality. They utilize the timing of Internet adoption as the source of a falsification exercise. They find no evidence that the incidence of cross location research collaborations is correlated with a location pair’s future adoption of Internet technology; that is, location pairs who adopt Internet technology experience no increase in the likelihood of a collaborative patent prior to adoption.
• Instrumental variables. We employ two sets of instruments that capture local variance in the costs to adopting Internet technology. The first addresses cross-sectional differences in local regulatory conditions that will shape the costs of purchasing Internet access. The second captures cross-sectional differences in familiarity and expertise with the Internet in the local regions where the establishments reside.