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Radical and Incremental Innovation: The Roles of Firms, Managers, and Innovators

Author

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  • Daron Acemoglu
  • Ufuk Akcigit
  • Murat Alp Celik

Abstract

We investigate the determinants of radical ("creative") innovations that break new ground in knowledge creation. We develop a model focusing on the choice between incremental and radical innovation and on how managers of different ages and human capital are sorted across firms. Firm- and patent-level evidence reveals that firms that are more "open to disruption" are significantly more likely to engage in radical innovation and hire younger managers and inventors with a comparative advantage in radical innovation. However, once the effect of the sorting is factored in, the (causal) impact of manager age on creative innovations, though positive, is small.

Suggested Citation

  • Daron Acemoglu & Ufuk Akcigit & Murat Alp Celik, 2022. "Radical and Incremental Innovation: The Roles of Firms, Managers, and Innovators," American Economic Journal: Macroeconomics, American Economic Association, vol. 14(3), pages 199-249, July.
    • Handle: RePEc:aea:aejmac:v:14:y:2022:i:3:p:199-249
    DOI: 10.1257/mac.20170410
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    Citations

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    Cited by:

    1. Ethan Ilzetzki, 2024. "Learning by Necessity: Government Demand, Capacity Constraints, and Productivity Growth," American Economic Review, American Economic Association, vol. 114(8), pages 2436-2471, August.
    2. Gomes, Orlando, 2024. "Optimal planning of technological options and productivity distribution dynamics," Economic Modelling, Elsevier, vol. 130(C).
    3. Orlando Gomes, 2024. "The emergence of chaos in productivity distribution dynamics," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 47(2), pages 565-596, December.
    4. Liu, Zijun & Chen, Sheng & Tang, Tingting & Luo, Hang & Guan, Qinghao, 2024. "How public education investment and advanced human capital structure affect regional innovation: A spatial econometric analysis from the perspective of innovation value chain," Socio-Economic Planning Sciences, Elsevier, vol. 91(C).
    5. Murat Alp Celik & Xu Tian, 2023. "Agency Frictions, Managerial Compensation, and Disruptive Innovations," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 16-38, December.
    6. Orlando Gomes, 2023. "Economic Growth Theory in the Twenty-First Century," Annals of Economics and Finance, Society for AEF, vol. 24(1), pages 39-67, May.
    7. Song Wang & Zhiyuan Lin, 2024. "Pay structure and firm technological innovation: comparative research based on three pay gaps," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-21, December.
    8. Byun, Seong K. & Oh, Jong-Min & Xia, Han, 2023. "R&D tax credits, technology spillovers, and firms' product convergence," Journal of Corporate Finance, Elsevier, vol. 80(C).
    9. Afees A. Salisu & Riza Demirer & Rangan Gupta, 2023. "Technological Shocks and Stock Market Volatility Over a Century: A GARCH-MIDAS Approach," Working Papers 202308, University of Pretoria, Department of Economics.
    10. Cao, Linyi & Jiang, Helu & Li, Guangwei & Zhu, Lijun, 2024. "Haste makes waste? Quantity-based subsidies under heterogeneous innovations," Journal of Monetary Economics, Elsevier, vol. 142(C).
    11. Matteo Romagnoli, 2022. "Can electricity liberalisation foster the development of radical clean-energy technologies?," Working Papers 2022.44, Fondazione Eni Enrico Mattei.
    12. Ionela Tofan & Elena Condrea, 2022. "Business performance in IT. A multivariate regression analysis," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 217-226, Decembrie.
    13. Jevgenij Gladevich, 2022. "Assessment of the innovation potential of the regions of Latvia, Lithuania and Belarus," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 10(1), pages 293-327, September.
    14. Romagnoli, Matteo, 2022. "Can electricity liberalisation foster the development of radical clean-energy technologies?," FEEM Working Papers 329738, Fondazione Eni Enrico Mattei (FEEM).
    15. FUKUGAWA Nobuya, 2023. "Determinants of Commercialization Modes of Science: Evidence from panel data of university technology transfer in Japan," Discussion papers 23053, Research Institute of Economy, Trade and Industry (RIETI).

    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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