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Get With the Program: Software-Driven Innovation in Traditional Manufacturing

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  • Lee G. Branstetter
  • Matej Drev
  • Namho Kwon

Abstract

This paper documents the increasing importance of software for successful innovation in manufacturing sectors well beyond the traditional definition of electronics and information technology. Using panel data for 229 publicly listed firms from 18 countries across four manufacturing industries over the period 1981-2005, we find significant variation across firms in the software intensity of their innovative activity. Firms that exhibit a higher level of software intensity generate more patents per R&D dollar, and their investment in R&D is more highly valued by equity markets. We present evidence that geographic differences in the abundance of skilled software labor are an important factor in determining sample firms’ software intensity and performance.

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  • Lee G. Branstetter & Matej Drev & Namho Kwon, 2015. "Get With the Program: Software-Driven Innovation in Traditional Manufacturing," NBER Working Papers 21752, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:21752
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    Cited by:

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    4. Lee G. Branstetter & Matej Drev & Namho Kwon, 2019. "Get with the Program: Software-Driven Innovation in Traditional Manufacturing," Management Science, INFORMS, vol. 65(2), pages 541-558, February.
    5. Alessandra Perri & Daniela Silvestri & Francesco Zirpoli, 2019. "Technology evolution in the global automotive industry: a patent-based analysis," Working Papers 04, Venice School of Management - Department of Management, Università Ca' Foscari Venezia.
    6. Kun Wang & Bing Chen & Yuhong Li, 2024. "Technological, process or managerial innovation? How does digital transformation affect green innovation in industrial enterprises?," Economic Change and Restructuring, Springer, vol. 57(1), pages 1-32, February.
    7. Dominique Guellec, 2020. "Digital Innovation and the Distribution of Income," NBER Chapters, in: Measuring and Accounting for Innovation in the Twenty-First Century, pages 323-370, National Bureau of Economic Research, Inc.
    8. Bernhard Ganglmair & Imke Reimers, 2019. "Visibility of Technology and Cumulative Innovation: Evidence from Trade Secrets Laws," CRC TR 224 Discussion Paper Series crctr224_2019_119v1, University of Bonn and University of Mannheim, Germany.
    9. Andersson, Martin & Kusetogullari, Anna & Wernberg, Joakim, 2021. "Software development and innovation: Exploring the software shift in innovation in Swedish firms," Technological Forecasting and Social Change, Elsevier, vol. 167(C).
    10. Yu-Kai Lin & Arun Rai, 2024. "The Scope of Software Patent Protection in the Digital Age: Evidence from Alice," Information Systems Research, INFORMS, vol. 35(2), pages 657-672, June.
    11. Liu, Changqing & Li, Lei, 2021. "Place-based techno-industrial policy and innovation: Government responses to the information revolution in China," China Economic Review, Elsevier, vol. 66(C).
    12. Yuan Feng & Changfei Nie, 2024. "Digital technology innovation and corporate environmental, social, and governance performance: Evidence from a sample of listed firms in China," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(5), pages 3836-3854, September.
    13. Bäck, Asta & Hajikhani, Arash & Jäger, Angela & Schubert, Torben & Suominen, Arho, 2022. "Return of the Solow-paradox in AI? AI-adoption and firm productivity," Papers in Innovation Studies 2022/1, Lund University, CIRCLE - Centre for Innovation Research.
    14. Chris Forman & Avi Goldfarb, 2021. "Concentration and Agglomeration of IT Innovation and Entrepreneurship: Evidence from Patenting," NBER Chapters, in: The Role of Innovation and Entrepreneurship in Economic Growth, pages 95-121, National Bureau of Economic Research, Inc.
    15. Wachs, Johannes & Nitecki, Mariusz & Schueller, William & Polleres, Axel, 2022. "The Geography of Open Source Software: Evidence from GitHub," Technological Forecasting and Social Change, Elsevier, vol. 176(C).
    16. Xiangfei Yuan & Haijing Hao & Chenghua Guan & Alex Pentland, 2021. "What are the key components of an entrepreneurial ecosystem in a developing economy? A longitudinal empirical study on technology business incubators in China," Papers 2103.08131, arXiv.org.
    17. Podrecca, Matteo & Culot, Giovanna & Tavassoli, Sam & Orzes, Guido, 2024. "Artificial intelligence for climate change: a patent analysis in the manufacturing sector," Papers in Innovation Studies 2024/12, Lund University, CIRCLE - Centre for Innovation Research.
    18. Choi, Hyundo, 2024. "Investing in hardware vs. software of digital systems for innovation outcomes: A contingency view," Technological Forecasting and Social Change, Elsevier, vol. 202(C).
    19. Tang, Haodan & Fang, Senhui & Jiang, Dianchun, 2022. "The market value effect of digital mergers and acquisitions: Evidence from China," Economic Modelling, Elsevier, vol. 116(C).
    20. Prasanna Tambe & Xuan Ye & Peter Cappelli, 2020. "Paying to Program? Engineering Brand and High-Tech Wages," Management Science, INFORMS, vol. 66(7), pages 3010-3028, July.
    21. Tian, Ying & Pang, Jun, 2023. "What causes dynamic change of green technology progress: Convergence analysis based on industrial restructuring and environmental regulation," Structural Change and Economic Dynamics, Elsevier, vol. 66(C), pages 189-199.
    22. Shuang Hao & Zhi Chen & Chien-Chih Wang & Che-Yu Hung, 2023. "Impact of Digital Service Trade Barriers and Cross-Border Digital Service Inputs on Economic Growth," Sustainability, MDPI, vol. 15(19), pages 1-20, October.
    23. Huang, Zhuo & Tao, Yunqing & Zhang, Qidi & Ye, Yongwei, 2023. "The road to entrepreneurship: The effect of China's broadband infrastructure construction," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 1831-1847.
    24. Feng Guo & Yijun Li & Likoebe M. Maruping & Adi Masli, 2023. "Complementarity Between Investment in Information Technology (IT) and IT Human Resources: Implications for Different Types of Firm Innovation," Information Systems Research, INFORMS, vol. 34(3), pages 1259-1275, September.

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    More about this item

    JEL classification:

    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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