Learning, Internal Research, and Spillovers Evidence from a Sample of R&D Laboratories

This paper presents new evidence on the practice of industrial Research and Development (R&D), especially the allocation between learning and internal research, and the role of outside knowledge, as represented by R&D spillovers, in reshaping this allocation. The evidence describes the sources of outside knowledge, portrays the flow of that knowledge into firms, and interprets the channels by which outside knowledge influences R&D. The empirical work is based on a sample of 220 R&D laboratories owned by 115 firms in the U.S. chemicals, machinery, electrical equipment, and motor vehicles industries. The findings are consistent with the view that universities and firms generate technological opportunities in R&D laboratories. In addition to partnerships that define rather strict channels of opportunity, the paper uncovers broader effects of R&D spillovers. The results also suggest that academic spillovers drive learning about universities, and that industrial spillovers drive learning about industry. In this way externally derived opportunities reshape the rate and direction of R&D. Overall the findings paint an image of practitioners of industrial R&D reaching aggressively for opportunities, rather than waiting for opportunities to come to them.