arts - paradise of novelty or loss of human capital?
TRANSCRIPT
Paradise of Novelty – or Loss of Human Capital? Changing Fields and Inventive Output
Sam ArtsFaculty of Business and Economics
Lee FlemingFung Institute for Engineering Leadership
OECD Blue Sky Conference 2016
RQ: What happens when an inventor changes fields?
“The man who employs either his labor or his stock in a grater variety of ways than his situation renders necessary… may hurt himself, and he generally does so… Jack of all trades will never be rich, says the proverb.”
Adam Smith, Book IV, Chapter V, p. 563.
“Almost always the men who achieve these fundamental inventions of a new paradigm have been either very young or very new to the field whose paradigm they change.”
Thomas Kuhn, The Structure of Scientific Revolutions, p. 89-90.
Really good arguments for the value of field-specific expertise … and not changing fields
• Benefits of specialization in labor– Smith 1776
• Knowledge accumulates as technology advances– Mokyr 1990, Jones 2009, not just economists: Gilfillan 1935, Basalla 1988
• Deep immersion in a field crucial for invention– Field-specific knowledge and skills foundation for creative thinking process (Gruber 1981,
Gardner 1993, Csikszentmihalyi 1996, Simon 1996)– ”… knowledge, expertise, technical skills, intelligence, and talent in the particular domain where
the problem-solver is working" (Amabile 1983, 2013)
… and really good arguments for the value of exposure to diversity … and changing fields
•Evolutionary analogies to variation stage, more material for recombinant novelty
– Darwin 1872, Poincare’ 1913, Campbell 1960, Simonton 1999
•Received wisdom for value of cross-disciplinary search•Field-specific expertise can block novel insights
– Inflexibility of the information processing system, negative transfer, Einstellung, or mental block (e.g., Luchins and Luchins 1959, French and Sternberg 1989)
– Changing fields, freed from conventions, approach problems with a helpful level of naïveté (Merton 1973: 518)
• Invention is novel and valuable (Amabile 2013)
–e.g. patentability
•Normative and popular connotation that all inventions are intrinsically novel and valuable
•Empirical reality: most new ideas are incremental, fail or have little value (Scherer and Harhoff 2000)
•Two separate dimensions
The answer to this question is intuitive – if you separate novelty from value
•Hypothesis 1: Inventors who do not change fields create more valuable inventions.
– Novices lack field-specific knowledge and expertise– Exploring new field is risky, difficult (learning takes time), failure
•Hypothesis 2: Inventors who do change fields create more novel inventions.
– Knowledge diversity and combinatorial opportunities– Not blocked by dominant paradigms
=> Key challenge: how to ameliorate this trade-off?
Trade-off between exploitation and exploration
•Eases the “burden of knowledge”, learning a new field less difficult and inefficient (Jones 2009, Singh and Fleming 2010)
•Stimulate creativity and new insights (Wuchty et al. 2007).
• Hypothesis 3a: The negative effect of changing fields on the value of invention is weaker for inventors who collaborate.
• Hypothesis 3b: The positive effect of changing fields on the novelty of invention is stronger for inventors who collaborate.
Collaboration in the new field
•Facilitates prediction and decreases the need for empirical iteration, experimentation, and learning (Roach and Cohen 2013, Fleming and Sorenson 2004).
•Exposure also stimulates novel insights.
• Hypothesis 4a: The negative effect of changing fields on the value of invention is weaker for inventors who rely on published science.
• Hypothesis 4b: The positive effect of changing fields on the novelty of invention is stronger for inventors who rely on published science.
Relying on published science in the new field
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Data and analysis
•Rely on repeated observations (patents) of the same inventor– To observe field changes – Study effect on novelty and value of the invention (patent)
•Large inventor-firm fixed-effects panel– All inventors on US patents with at least one prior patent, two patents assigned to the same firm, 1975-2002
– 2,705,431 patents; 396,336 inventors; 46,880 unique firms– Control for unobserved heterogeneity across inventors and firms
•Natural experiment in non-compete labor law– Michigan Antitrust Reform Act (1985)– Exogenous variation in changing fields among inventors moving between firms
– CEM matching (Iacus et al. 2009, 2011)
– 6,264 patents, 4,686 inventors
• Value– Number of times renewal/maintenance fees are paid
• 0,1,2,3 times; 4, 8, and 12 years after grant
– Number of forward citations received within 10 years
• Novelty– Number of new to the patent corpus words found in the title, abstract and claims
• all patents before 1980 establish benchmark, numbers and hyphens removed
– Number of backward technical prior art citations (Ahuja and Lampert 2001)
Dependent variables (patent level)
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Most reused novel words by five-year periods and colored by NBER technology category
Independent variable
• Changing fields– Rely on repeated patents of the same inventor– Binary: no overlap between three digit classes of all prior patents and the classes of the current patent.
•Collaboration– Binary: more than one inventor on the patent.
•Science– Binary: patent cites non-patent literature (mostly scientific publications, see Fleming
and Sorenson 2004)
• Interaction between changing fields and collaboration/ science
Control variables
•Number of prior patents (ln)•Technical specialization•Number of prior collaborations (ln)•Move•Prior move•Days since last patent (ln)•Days since first patent (ln)•Number of prior patents firm (ln)•Number of classes (ln)•Number of subclasses (ln)
Conclusion
• Changing fields leads to less valuable inventions– Importance of field-specific knowledge and expertise– Accretion of specialized human capital
• Changing fields leads to more novel inventions– Importance of exposure to diversity and fresh perspectives– Prior field-specific expertise constrains search and blocks novel ideas
•How to manage this ultimate trade off? How can inventors optimally explore?
– Collaboration in new field reduces negative impact on value– Reliance on published science strengthens positive impact on novelty
Thanks!
Questions?
A natural experiment to strengthen causal inference
• Non compete contract prevents the employee from working within the same field of expertise (and exploiting their knowledge) after moving to a new firm
• Used by firms to protect knowledge and expertise • Prohibited in some US states
• e.g. Cal and Silicon Valley
• Michigan Antitrust reform Act (1985)• Unintended change in non-compete labor law • Non competes became legally enforceable• Mobile inventors moving to a new firm are exogenously pushed to change fields because of the threat of litigation (Marx 2011)
Michigan experiment
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Data and analysis
•First patent of an inventor after they moved between two firms within the same state.
• Inventors with at least one prior patent before MARA (1985) in a non-enforcing state, and to patents filed between 1975 and 1995 (10 years before and after MARA
•Exploit DD: only mobile inventors in Michigan after 1985 are affect by MARA
MARA as an instrument for changing fields
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