Timing of Search and Innovation. The Moderating Effect of Firm Age and Size

This paper investigates the relationship between the age of knowledge inputs upon which an innovation is built and its value, as well as how this relationship strongly depends on specific firms? characteristics, as age and size. Following previous empirical evidences, we argue that the age of knowledge depicts an inverted U-shaped effect on the value of innovation, since firms exploiting middle-aged inputs exhibit greater returns than those using both nascent and mature knowledge. Nevertheless, we seek to advance the existing literature by revealing how the successful use of knowledge inputs of different age is strictly related to both the age and size of inventing firms. Specifically, we state that older firms outperform younger ones when employ mature knowledge, while young firms are able to better exploit nascent and middle-aged knowledge. In terms of size, we expect that larger firms present a greater capability to innovate by using both nascent and mature knowledge, while smaller firms develop more valuable innovative solutions when build upon middle-aged knowledge inputs. These ideas are empirically tested on a sample of biotechnology patented inventions and the results offer support for the hypotheses developed in the paper.

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