Strategy and innovation scholars have long emphasized the crucial role of demand in driving innovation progress. However, relatively less is known about how changes in demand conditions in a domain impact the reallocation of innovation resources and technological progress in other domains. In this study, I propose that an increase in demand for innovation in a domain can have negative impacts on firms in adjacent domains, because it competes away knowledge workers, a critical innovation resource. Empirically, I exploit an unexpected environmental policy shock that led to an exogenous increase in demand for electric vehicle (EV) technologies. I find that, following an increase in innovation activities in the EV domain, some firms in adjacent technological domains not only experienced a decline in EV innovations, but also suffered a more significant decline (twice as much) in their core technological domains and their ability to explore new technological domains. This negative effect was stronger for firms that were farther in the product market from the EV domain but were in a related technological space, and for firms in other growing (rather than declining) technological domains (e.g., photovoltaic technologies). Further analyses suggest that this occurred because firms in adjacent technological domains were more likely to lose inventors to firms in the EV domain. These findings have implications for managers and policymakers by highlighting potential negative spillover effects of demand-based innovation policies and practices.

Firms and policymakers are highly dependent on academic science for knowledge advancement to help overcome technological barriers and address pressing societal challenges, and they increasingly engage in shaping the research direction of high-quality academic scientists towards certain innovation domains. However, we know relatively little about how scientists respond to an increased demand for their expertise in an innovation domain. In this paper, I examine how scientists’ research productivity (which proxies their research ability) and intellectual distance from the demand shape their propensity to respond to the demand and the quality of their research outcomes in the domain. Empirically, I exploit an unanticipated environmental policy shock that led to increased demand for innovation in electric vehicle (EV) technologies. Empirical results suggest that more productive scientists (from both close and distant domains) are more likely to produce higher-quality EV research outcomes. Furthermore, EV research that includes productive coauthors from distant domains are more likely to be of higher quality and to be utilized in future technological innovations (i.e., patents). However, I also find that as scientists’ distance from the EV domain increases, more productive scientists progressively have reduced incentive to engage with EV research, relative to less productive scientists. Specifically, in domains intellectually closer to EV research, more productive close scientists are more likely to engage with EV research than less productive close scientists. By contrast, in domains intellectually more distant from EV research, less productive distant scientists are relatively more likely to engage with EV research than more productive distant scientists.

Large corporate labs play an important role in innovation. Recently, there has been a trend toward universities producing scientific research and then corporate labs developing this research into practical applications. This division of scientific research labor can have negative consequences for the development of general purpose technologies and other enabling technologies. These technologies rely on a positive feedback loop of innovation, from seeding to complementary trajectories and back, in order to generate substantial productivity gains for companies and for the economy overall. A push against the increasing division of scientific research labor may catalyze the feedback loop. We explore this possibility in the context of the development of quantum computers. After a change in companies’ incentives to engage in scientific research, following a surprise announcement about the near-term commercial potential of quantum computing, we document a rise in company academic publications and patents in quantum computing hardware. Soon after, we document a rise in academic publications and patents in the complementary software trajectory. We also find suggestive evidence of a feedback loop between the hardware and the software trajectories. We interpret these results to suggest complementarities between company and university scientific research in the context of a newly emerging enabling technology.

Understanding factors affecting the direction of innovation is a central aim of research in the economics of innovation. Progress on this topic has been inhibited by difficulties in measuring distance and movement in knowledge space. We describe a methodology that infers the mapping of the knowledge landscape based on text documents. The approach is based on an unassisted machine learning technique, Hierarchical Dirichlet Process (HDP), which flexibly identifies patterns in text corpora. The resulting mapping of the knowledge landscape enables calculations of distance and movement, measures that are valuable in several contexts for research in innovation. We benchmark and demonstrate the benefits of this approach in the context of 44 years of USPTO data.

Using panel data on 251,511 patent inventors matched with voter registration records containing partisan affiliation, we provide the first large-scale look into the partisanship of American inventors. We document that the modal inventor is Republican and that the partisan composition of inventors has changed in ways that are not reflective of partisan affiliation trends amongst the broader population. We then show that the partisan affiliation of inventors is associated with technological invention related to guns and climate change, two issue areas associated with partisan divide. These findings suggest that inventor partisanship may have implications for the direction of inventive activity.