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Market-Based Solutions to Vital Economic Issues
Research
May 19, 2020

Overseeing Innovation

Abstract

We study the effect of senior manager oversight on inventors’ productivity. We use changes in travel times between inventors and their employer’s headquarters caused by flight time changes as sources of plausibly exogenous variation in manager oversight of inventors. We find that oversight increases inventors’ productivity, as measured by equity market returns to patent approval announcements, the number of patent filings, and forward citations received. Oversight also increases inventors’ creativity and propensity to collaborate, and has a greater effect when the manager’s incentive to invest in the inventor is greater. Consequently, manager oversight appears to increase inventor productivity via advising and information sharing, and not via greater control. We also find that the effects of oversight vary with three unique features of innovation: its horizon, its creativity, and the difficulty contracting with inventors. Our results suggest that the primary role of managers in innovative settings is to provide guidance, rather than to exercise control.

Note: Research papers posted on SSRN, including any findings, may differ from the final version chosen for publication in academic journals.


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