Heli C. Wang, Wei-Ru Chen
Should firms commit in developing firm-specific innovations-innovations that are valued higher inside a firm than in the market? Departing from the existing innovation literature, this paper argues that firmspecificity in innovations may function as an effective isolating mechanism that helps firms better appropriate innovation rents. However, such an advantage may turn out to be a liability when the operational environment is fast-changing. Moreover, firms that have high levels of firm-specificity in their innovations but conduct their innovative activities in diverse technological areas are likely to prevent the potential value erosion of their firm-specific innovations due to environmental changes. Results from patent citation data of U.S. manufacturing firms support these key arguments.
Department of Management of Organizations, Hong Kong University of Science and Technology, Kowloon, Hong Kong; INSEAD, Singapore
