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Risky innovation: The impact of internal and external R&D strategies upon the distribution of returns

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  • Mata, José
  • Woerter, Martin

Abstract

External innovation increases the profits of the median firm, but also increases dispersion and the kurtosis of the distribution of profits. This means that external strategies are risky and may require a very large number of attempts before average returns are obtained. This puts smaller firms into a position of disproportionately high risk. Despite the earlier evidence that the rewards from innovation are positively skewed, we find no effect of innovation strategies upon the skewness of the distribution of firms’ profits.

Suggested Citation

  • Mata, José & Woerter, Martin, 2013. "Risky innovation: The impact of internal and external R&D strategies upon the distribution of returns," Research Policy, Elsevier, vol. 42(2), pages 495-501.
    • Handle: RePEc:eee:respol:v:42:y:2013:i:2:p:495-501
    DOI: 10.1016/j.respol.2012.08.004
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    More about this item

    Keywords

    Risk; Innovation; Research and development; Firm performance;
    All these keywords.

    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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