Working Paper: NBER ID: w19894
Authors: Daron Acemoglu; Ufuk Akcigit; Murat Alp Celik
Abstract: This paper argues that openness to new, unconventional and disruptive ideas has a first-order impact on creative innovations—innovations that break new ground in terms of knowledge creation. After presenting a motivating model focusing on the choice between incremental and radical innovation, and on how managers of different ages and human capital are sorted across different firms with different degrees of openness to disruption, we provide firm-level, patent level and cross-country evidence consistent with this pattern. Our measures of creative innovations proxy for innovation quality (average number of citations per patent) and creativity (fraction of superstar innovators, the likelihood of a very high number of citations, and generality of patents). Our main proxy for openness to disruption is the age of the manager - based on the idea that only companies or societies open to such disruption will allow the young to rise up within the hierarchy. Using this proxy at the firm, patent and country level, we present robust evidence that openness to disruption is associated with more creative innovations, but we also show that once the effect of the sorting of young managers to firms that are more open to disruption is factored in, the (causal) impact of manager age on creative innovations is small.
Keywords: creative innovations; manager age; openness to disruption; radical innovations
JEL Codes: O33; O40; O43; P10; P16; Z1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| manager age (M54) | openness to disruption (O36) |
| openness to disruption (O36) | creative innovations (O35) |
| manager age (M54) | radical innovations (O35) |
| younger managers (M54) | likelihood of radical innovations (O36) |
| manager age (M54) | quality of creative innovations (O36) |
| younger managers (M54) | higher citation patents (O34) |
| younger managers (M54) | greater fraction of patents by superstar innovators (O36) |
| firm culture (L22) | increase in creative innovations (O39) |
| manager age (M54) | firm predisposition to innovation (O31) |