Visiting Speaker: Seula Kim, Penn State University
Presentation Title: Ideas and Firm Dynamics When It Takes Two to Tango, joint with Jane Olmstead-Rumsey (LSE) and Honghao Wang (LSE)
Abstract:
Idea production is increasingly performed by teams of inventors rather than individuals. We study two-way interaction between idea team production and firm dynamics, examining how firms shape teams and how the rise of teams impacts firm dynamics. Using U.S. patent data in 1976-2020, we find the increasing trend of team innovation, 90% of which is driven within firms; team patent and quality rising in the number of inventors; and team characteristics varying with firm size, productivity, and age. Motivated by these facts, we develop a tractable framework microfounding inventor team formation within firms and show that team-based production can increase returns to scale in R&D labor, raising the optimal size of innovative firms. Embedding this framework into a canonical model of frictional labor market, we find that team invention increases tightness in the inventor labor market, increases R&D labor concentration in large firms, lowers the R&D employment share of small firms, and raises large firm wage premiums for knowledge workers, consistent with the data.
Host: Ben Pugsley