Abstract
Where do firms innovate? Mapping their locations and directions in technological space is challenging due to its high dimensionality. We propose a new method to characterize firms’ inventive activities via topological data analysis (TDA) that represents high-dimensional data in a shape graph. Applying this method to 333 major firms’ patents in 1976–2005 reveals hitherto undocumented industry dynamics: some firms remain undifferentiated; others develop unique portfolios. Firms with unique trajectories, which we define and measure graph-theoretically as “flares” in the Mapper graph, tend to perform better. This association is statistically and economically significant, and continues to hold after we control for portfolio size, firm survivorship, and industry classification.
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