Abstract
Using a sample of patents granted to U.S. firms over the period 1980-2008, we find that firms’ organization capital has a positive impact on innovation. Specifically, we find that firms with more organization capital generate greater number of patents and receive more citations on their patents. The results are robust to the use of alternative measures of organization capital and innovation and using a two-stage least squares method and propensity-score matching to control for endogeneity. In addition, we find that better capabilities to handle inherent difficulties associated with the innovation process and reducing career concern threats are possible mechanisms through which organization capital affects firm innovation. Overall, the results provide strong evidence about the vital role organizational characteristics such as investment in organization capital play for innovation, an important driver of firm value and economic growth.
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