Does innovation create more value when based on science? Yes, but...

A new study concludes that corporate innovations built on scientific discoveries create more value but also entail more risk

For as long as there have been corporations, there has been a relationship between them and researchers. Indeed, the Dutch East India Company — one of the most important precursors of today's corporations — hired scientists and maintained a strong knowledge network throughout its history. In the late 20th Century, corporate institutions such as XEROX parc and Bell Labs (now owned by Nokia) created genuine scientific breakthroughs, just as universities expanded the number of centers trying to connect scientific research to corporate innovation programs. Although these collaborations can be controversial, the ever-growing need for external funding at most private and public universities means that the relationships between corporations and scientific research centers continue to grow.

The long history of companies working with scientific discoveries has left a legacy of anecdotal successes and failures, yet, surprisingly, there is a lack of detailed analysis that explains and quantifies the dynamics between scientific research and business innovation. A new working paper from Martin Watzinger (Münster), Joshua L. Krieger (Harvard), and Monika Schnitzer (Ludwig Maximilian) provides valuable insight into these connections. 

The researchers' goal in this analysis was as straightforward as it was challenging: attempt to determine the value-creation role of scientific discoveries in the innovation efforts of corporations. This question is essential since many firms have well-established links between their Research & Development (R&D) teams and scientific institutions. Moreover, note the authors, "while scientific advances are the bedrock of industrial R&D, only some of those activities build directly on science translating discoveries from laboratories and scientific publications into novel inventions and commercial products." Other corporate innovation efforts "rely only indirectly on science experimenting, tinkering, optimizing and inventing without the aid (and/or constraints) of the 'republic of science' but still using tools and technologies enabled through centuries of scientific advance." 

The challenge, then, was to determine the extent to which firms' use of scientific knowledge "affects the value they capture from those innovations."