Graduate Module on Innovation and Productivity

In this paper I directly test the hypothesis that interactions between inventors of different firms drive R&D spillovers. I construct a network of publicly traded companies where each link is a function of the relative proportion of two firms ’ inventors who have patent coauthors in both organizations. I use this measure in order to weigh the impact of R&D performed by each firm on the productivity and innovation outcomes of its neighbors. An empirical concern is that the resulting estimates may reflect unobserved, simultaneous drivers of both R&D and firm performance. I address this problem with an innovative IV strategy, motivated by a game-theoretic model of firm interaction. I instrument the R&D choices of one firm’s neighbors with thos