(job market paper)

Over the past forty years, the international organization of R&D has globalized, as evidenced by an increased reliance of US firms on overseas inventors. However, there is little evidence of the nature and direction of inventions produced overseas as compared to those at home. Using a simple framework of location choice of R&D, this paper provides evidence for an offshoring penalty and considers which firms can overcome the offshoring penalty. Amid restrictive immigration policies to hire overseas talent in the US, the paper also shows timely evidence of how the relative cost of inventing at home can change the nature of inventions produced at home and overseas. Using a sample of patents from publicly traded US firms that invent both at home and overseas, I test the predictions from the framework empirically.

with Ashish Arora, Wesley Cohen and Honggi Lee

Do large firms produce more valuable inventions, and if so, why? After confirming that large firms indeed produce more valuable inventions, we consider two possible sources: a superior ability to invent, or a superior ability to extract value from their inventions. We develop a simple model that discriminates between the two explanations. Using a sample of 2,786 public corporations, and measures of both patent quality and patent value, we find that, while average invention value rises with size, average invention quality declines, suggesting, per our model, that the large firm advantage is not due to superior inventive capability, but due to the superior ability to extract value. We provide evidence suggesting that this superior ability to extract value is due to the greater commercialization capabilities of larger firms.