Young, Restless and Creative - Innovation

Updated: Jul 12, 2019

There are currently more than half a million patents granted by the US Patent and Trademark Office (USPTO) per year, only a handful make a fundamental contribution to society's knowledge, and only a small fraction account for the bulk of the value created.

The economists Acemoglu, Akcigit and Celik investigate the relationship between openness to disruption and creative innovations, that is the innovations that break new ground in terms of knowledge creation.

First, they are 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.

Then they provide firm-level and patent-level evidence consistent with this pattern. Using the age of top managers as a proxy, they find robust evidence that openness to disruption is associated with more creative innovations, but also 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.

Fi…rms that tend to employ younger CEOs receive a greater number of citations per patent, have a greater fraction of their patents generated by superstar innovators, have more tail innovations, which are at the very high percentiles of the citations distribution, and have more general patents. Younger CEOs tend to work with younger inventors.

#innovation #openness #corporateculture #creativity #individualism #leadership #entrepreneurship #manager #age

Reference: Akcigit, U., Celik, M., & Acemoglu, D. (2014). Young, Restless and Creative: Openness to Disruption and Creative Innovations (No. 377). Society for Economic Dynamics.

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