Research summary: In this article, we document a shift away from science by large corporations between 1980 and 2006. We find that publications by company scientists have declined over time in a range of industries. We also find that the value attributable to scientific research has dropped, whereas the value attributable to technical knowledge (as measured by patents) has remained stable. These trends are unlikely to be driven principally by changes in publication practices. Furthermore, science continues to be useful as an input into innovation. Our evidence points to a reduction of the private benefits of internal research. Large firms still value the golden eggs of science (as reflected in patents), but seem to be increasingly unwilling to invest in the golden goose itself (the internal scientific capabilities). Managerial summary: There is a widespread belief among commentators that large American corporations are withdrawing from research. Large corporations may still collaborate with universities and acquire promising science‐based start‐ups, but their labs increasingly focus on developing existing knowledge and commercializing it, rather than creating new knowledge. In this article, we combine firm‐level financial information with a large and comprehensive data set on firm publications, patents and acquisitions to quantify the withdrawal from science by large American corporations between 1980 and 2006. This withdrawal is associated with a decline in the private value of research activities, even though scientific knowledge itself remains important for corporate invention. We discuss the managerial and policy implications of our findings.

Using new data on citations to university patents and scientific publications, we study how geography affects university knowledge spillovers. Citations to patents decline sharply with distance up to about 150 miles and are strongly constrained by state borders. Distance also constrains citations to scientific publications, but the impact is less sharp and persists over greater distances. The state border effect for publications is significant only for lower quality public universities. We show that the state border effect is heterogeneous, and is strongly influenced by university and state characteristics and policies. It is larger for public universities and those with strong local development policies. The border effect is larger in states with strong non-compete laws that facilitate intrastate labor mobility, states with greater reliance on in-state educated scientists and engineers, and states with lower rates of interstate scientific labor mobility. We also confirm the impact of non-compete statutes by studying a policy reform in Michigan.

We bridge current streams of innovation research to explore the interplay between R&D, external knowledge, and organizational structure-three elements of a firm's innovation strategy, which we argue should logically be studied together. Using within-firm patent assignment patterns, we develop a novel measure of structure for a large sample of American firms. We find that centralized firms invest more in research, and patent more per R&D dollar, than decentralized firms. Both types access technology via mergers and acquisitions, but their acquisitions differ in terms of frequency, size, and integration. Consistent with our framework, their sources of value creation differ: while centralized firms derive more value from internal R&D, decentralized firms rely more on external knowledge. We discuss how these findings should stimulate more integrative work on theories of innovation.

U sing novel data on European firms, this paper investigates the relationship between business groups and innovation. Controlling for various firm characteristics, we find that group affiliates are more innovative than standalones. We examine several hypotheses to explain this finding, focusing on group internal capital markets and knowledge spillovers. We find that group affiliation is particularly important for innovation in industries that rely more on external funding and in groups with more diversified capital sources, consistent with the internal capital markets hypothesis. Our results suggest that knowledge spillovers are not the main driver of innovation in business groups because firms affiliated with the same group do not have a common research focus and are unlikely to cite each other's patents.

We investigate the effect of financial development on the formation of European corporate groups. Because crosscountry regressions are hard to interpret in a causal sense, we exploit exogenous industry measures to investigate a specific channel through which financial development may affect group affiliation: internal capital markets. Using a comprehensive firm-level data set on European corporate groups in 15 countries, we find that countries with less developed financial markets have a higher percentage of group affiliates in more capitalintensive industries. This relationship is more pronounced for young and small firms and for affiliates of large and diversified groups. Our findings are consistent with the view that internal capital markets may, under some conditions, be more efficient than prevailing external markets, and that this may drive group affiliation even in developed economies.