R&D Production Team Composition and Firm-Level Innovation

Vikas Aggarwal, INSEAD; David Hsu, Management, The Wharton School; and Andy Wu, Business Economics and Public Policy, The Wharton School

Abstract: How should a firm organize the diversity of technical experience contained within its pool of inventive human capital when firm-level innovation is a desired performance outcome? Using a sample of biotechnology start-ups observed from their founding onwards we examine the implications of alternate firm-level design regimes, drawing on both a firm-year panel structure, as well as an inventor-year difference-in-differences empirical approach. Our results suggest that organizing a firm’s human capital with greater across-team diversity yields increased firm-level innovation benefits as compared to when the firm’s human capital is organized with greater within-team diversity. We find that the benefits of across-team diversity stem mainly from the influence of that particular diversity regime on team stability.

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