Working Paper: NBER ID: w21752
Authors: Lee G. Branstetter; Matej Drev; Namho Kwon
Abstract: This paper documents the increasing importance of software for successful innovation in manufacturing sectors well beyond the traditional definition of electronics and information technology. Using panel data for 229 publicly listed firms from 18 countries across four manufacturing industries over the period 1981-2005, we find significant variation across firms in the software intensity of their innovative activity. Firms that exhibit a higher level of software intensity generate more patents per R&D dollar, and their investment in R&D is more highly valued by equity markets. We present evidence that geographic differences in the abundance of skilled software labor are an important factor in determining sample firms’ software intensity and performance.
Keywords: Software Innovation; Manufacturing; R&D; Patent Productivity; Market Valuation
JEL Codes: O14; O31; O32; O33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| software intensity (C88) | patent productivity (O34) |
| software intensity (C88) | market valuation of R&D investment (O32) |
| geographic distribution of skilled software engineers (J61) | software intensity (C88) |
| software intensity (C88) | innovation outcomes (O36) |
| firm-specific characteristics (G32) | software intensity (C88) |
| industry-specific technological opportunities (L63) | software intensity (C88) |